Bitcoin’s Rally is over, for now. Expect a drift lower before volatility next week.
Bitcoin
and other cryptocurrencies fell back on Thursday, another sign of slowing momentum in the digital asset rally that has started in 2023. Cryptos look vulnerable to a fall ahead of a big catalyst next week – which could trigger fresh volatility.
The price of Bitcoin has lost 2% over the past 24 hours to $22,700, around the bottom of the trading range either side of $23,000 that has dominated much of the past few weeks. The biggest digital asset is still up around 40% this year, having marched higher from late 2022’s two-year low to the highest levels since last summer.
“Bitcoin’s strong start to the year appears to be over for now,” said Edward Moya, analyst at broker Oanda.
While Bitcoin and other risk-sensitive assets such as stocks got off to a good start in 2023 – with one of Bitcoin’s best winning streaks in years – cryptos have fallen in recent days along with
Dow Jones Industrial Average
and
S&P 500.
Digital assets and stocks were closely correlated last year amid a tough macro backdrop of high inflation, rising interest rates and recession risks, with both asset classes gaining in January as investors grew optimistic that the worst was over.
That optimism has faded somewhat as traders continue to ponder the Federal Reserve’s next move on interest rates, with central bank officials striking a more aggressive tone on monetary policy in comments this week. Traders are now looking ahead to next week’s release of key US consumer inflation data, which is likely to be a key catalyst for crypto and change future interest rate expectations.
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Don’t expect much from digital assets until then. Indeed, after such a roaring rally to start the year – and amid signs that gains may be largely built on sand with a weak technical and fundamental backdrop – some downside may be in order.
“After hitting some key technical resistance just above the $24,000 level, Bitcoin is entering consolidation modes until we see the next big move in bond yields,” said Oandas Moya. “Volatility in the bond market will be crazy after the Valentine’s Day inflation report, which could mean Bitcoin could move towards the $20,000 level if stocks get hammered over the next few sessions.”
Beyond Bitcoin,
Ether
— the second largest crypto — fell 2% to $1,630. Smaller cryptos or altcoins were more mixed, too
Cardano
down 3% but
Polygon
jumped 4%. Memecoins were weaker, med
Dogecoin
down 4% and
Shiba Inu
drop 5%.
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Write to Jack Denton at [email protected]
