Bitcoin price is falling. Where the slide could stop.
Bitcoin
and cryptocurrencies fell on Friday, falling back into lockstep with the stock market as broader investor sentiment soured amid fears the Federal Reserve will continue to inflict pain on risk-sensitive assets with higher interest rates.
The price of Bitcoin has fallen 3% in the past 24 hours to $23,875, crumbling from six-month highs above $25,000 in earlier trade. The biggest digital asset is up more than 40% this year as investors flocked back to high-risk plays like Bitcoin, but remains around a third of its November 2021 record high. While the climb to $25,000 spurred optimism, it remains a long march back to $30,000—the level of last June, before a wave of crypto company bankruptcies rocked the sector.
“Bitcoin’s failure to break above the August high was a disappointment and an immediate retest is not likely, but given Wednesday’s sudden price rally, there may be many market participants looking to buy the dip,” said Yuya Hasegawa. an analyst at the crypto exchange Bitbank. “The price is likely to be able to defend the psychological level of $23,000 in the short term.”
Cryptos had rallied higher in recent days in the face of falls in the stock market, where
Dow Jones Industrial Average
and
S&P 500
has been under pressure. But the correlation between the two risk-sensitive asset classes – strengthened over the past year against a tough macro backdrop of high inflation and rising interest rates – is too strong to break yet.
Mixed messages in economic data on the state of inflation have raised fears among investors this week that the Fed will continue to raise interest rates aggressively. It flies in the face of the narrative that inflation is falling and monetary policy will ease, which has driven recent gains in risk assets. The central bank’s dramatic tightening of monetary conditions last year, an attempt to curb decades of high inflation, was the driving force behind 2022’s market sell-off, and higher prices are likely to equate to more pain for Bitcoin.
Advertisement – Scroll to continue
In the short term, at least, where might the slide stop?
“The risk/reward is unfavorable with initial support below $20,000 defined by the cloud model and the 200-day moving average,” said Katie Stockton, managing partner at technical research group Fairlead Strategies.
Alex Kuptsikevich, analyst at the broker FxPro, is a little more optimistic. “The short-term technical picture gives the bulls a chance, suggesting a mini-correction as part of a new upward wave,” Kuptsikevich said. “However, a daily or weekend consolidation could be a harbinger of a deeper decline, forcing a renewed focus on the still bearish longer-term picture.”
Beyond Bitcoin,
Ether
—the second largest crypto lost 1.5% to $1,650. Smaller cryptos or altcoins were more mixed, too
Cardano
misses 2% but
Polygon
jumped 7%. Memecoins were more muted, med
Dogecoin
down 2% and
Shiba Inu
Advertisement – Scroll to continue
reduction 4%.
Write to Jack Denton at [email protected]
