There has been a broad selloff in cryptocurrencies even as stock markets were rising, which was a bearish sign on crypto, but the blow to risk sentiment we got yesterday from the hawkish surprise in the FOMC meeting minutes has sent crypto even lower.
Although we have medium-term bearish momentum here, it may be that the price is now settling on the support level we see drawn in the price chart below at $42,651 which is quite confluent with the quarter-number at $42,500. I donโt expect the bulls to push the price up much from here, but if we see the price consolidate for at least a few more hours, a breakdown below $42,500 could be an effective short trade entry signal.
Bitcoin extended a weeks-long drop on Friday, falling below $42,000 to levels not seen since September.
The largest cryptocurrency declined as much as 4.9% to $41,008, marking a tumble of about 40% from its record near $69,000 reached Nov. 10. Ether, the second-largest, dropped as much as 9% to its lowest level since Sept. 30. Both of those tokens, as well as others including Binance Coin, Solana, Cardano and XRP are down more than 10% in the past seven days, according to CoinGecko.
The retreat comes after minutes from the Federal Reserveโs December meeting, published Wednesday, flagged the chance of earlier- and faster-than-expected rate hikes as well as potential balance-sheet rundown.
โThe Fedโs intention to reduce the balance sheet in Q1 2022 is the primary cause of this sell-off,โ Fundstrat strategists said in a note Thursday. โUnfortunately, no immediate support looks likely ahead of September 2021 lows at $39,573, with breaks of that leading down to last summerโs May-July bottom.โ
Bitcoin gained about 60% last year, outperforming other asset classes amid a narrative that included institutional adoption, inflation protection and investment diversification. Itโs struggled in recent weeks, though, amid a volatile period for financial markets. Spiking inflation is leading central banks to tighten monetary policy, threatening to reduce the liquidity tailwind that lifted a wide range of assets.
โAs the crypto market matures, we can see major crypto assets such as Bitcoin and Ethereum increasingly move in tandem with traditional markets including Treasury bonds,โ said Ben Caselin, head of research and strategy at crypto exchange AAX.
Also factoring into the declines, according to Todd Morakis, co-founder of digital-finance product and service provider JST Capital: the unrest in Kazakhstan, where a substantial number of crypto-mining operations had gone after Chinaโs crackdown on the practice, and which were already affected by the countryโs recent power-supply troubles.
The Bitcoin hash rate, a measure of the networkโs computing power, dropped to 176 million terahashes on Thursday from a record of about 208 million on Jan. 1, according to data from Blockchain.com.
๐๐ญ๐ข๐ฅ๐ฅ, ๐ญ๐ก๐๐ซ๐ ๐ฐ๐๐ซ๐ ๐ฌ๐ข๐ ๐ง๐ฌ ๐จ๐ ๐ ๐ฉ๐จ๐ญ๐๐ง๐ญ๐ข๐๐ฅ ๐ซ๐๐๐จ๐ฏ๐๐ซ๐ฒ: Hayden Hughes, chief executive officer of Alpha Impact, a social-trading platform, said his client base was โaccumulating heavilyโ in the Asia morning, though with a strong preference for Ether as opposed to Bitcoin. And Jeffrey Halley, senior market strategist at Oanda Asia-Pacific, noted that the relative strength index or RSI is โwell oversoldโ and he wouldnโt be surprised to see a bounce back to $45,000.
A break of Bitcoinโs price below $41,000 โcould get ugly, with the mid-to-low thirties a possible destination,โ said Antoni Trenchev, co-founder of crypto lender Nexo. He added that Bitcoin endured a two-month period of consolidation in the $30,000 to $40,000 range from May to July last year, and โa repeat of history canโt be ruled out as Fed tightening remains the popular narrative.โ
- ๐๐โ๐ ๐ถ๐บ๐ฝ๐ผ๐ฟ๐๐ฎ๐ป๐ to keep in mind that cryptocurrency markets are extremely volatile, making it difficult to accurately predict what a coinโs price will be in a few hours or a few days and even harder to give long-term estimates. As such, analysts and online forecasting sites can get their predictions wrong. We recommend that you always do your own research and consider the latest market trends, news, technical and fundamental analysis , and expert opinion before making any investment decisions. Be patient and look long term wisely and never invest more than you can afford to lose.
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