Following the formation of the cryptocurrency’s first red candle on January 18, the two-week winning run that Bitcoin (BTC) had been on has finally come to an end.
The previous day, it seemed as if Bitcoin might equal or possibly break its record set in November 2013 of 15 straight days of positive price movement. This would have been the longest stretch of its kind in its entire existence.
In spite of the fact that the record wasn’t broken, Bitcoin managed to register the longest victory streak since the 2013 record in a run-up that some Twitter critics have described as “crazy.” Bitcoin is denoted by #. One bearish daily candle does not cancel out two weeks of all green candles being bullish.
the 18th of January, 2023 — IncomeSharks (@IncomeSharks) The primary reason for the negative price action appeared to be an ominous announcement made earlier on January 18 by the United States Department of Justice (DOJ), which stated that it would “announce an international cryptocurrency enforcement action.” [Citizens] should be aware that the DOJ has the authority to take legal action against anyone who engages in illegal activity related to cryptocurrencies.
However, it turned out that the action was taken against a rather obscure cryptocurrency exchange called Bitzlato that was situated in Hong Kong and had connections to Russia. Many people had assumed that it may be against a prominent cryptocurrency exchange or organisation.
Bitcoin (BTC) and cryptocurrency holders are enjoying the fruits of their labor on Feb. 10 after Bitcoin price rallied shortly after the U.S. Bureau of Labor Statistics showed a blistering 7.5% Consumer Price Index (CPI) print. This shows that inflation continues to worsen as fiat currencies bleed out their purchasing power.
Data from Cointelegraph Markets Pro and TradingView shows that after trading below $44,000 during the early hours on Thursday, the price of Bitcoin spiked to an intraday high at $45,850 following the release of the CPI data and most major stock market indices plunged into the red.
BTC/USDT 1-day chart. Source: TradingView
Here’s a look at what several analysts are saying about how Thursday’s CPI print could affect the price action for BTC moving forward and what levels to keep an eye on as the world grapples with high inflation.
Bitcoin enters a new cycle
“We are in a new cycle now” according to Ran Neuner, host of CNBC’s Crypto Trader, who posted the following chart highlighting the February BTC breakout as part of a cyclical pattern that Bitcoin has been trading in over the past year.
BTC/USD 1-day chart. Source: Twitter
As shown in the chart above, this is the second time in less than a year that BTC has reversed course to head higher following a steep downtrend.
Neuner said,
“This CPI pump is confirmation that CPI/Interest rate hikes are part of the old cycle. Ever since we broke the trend line, the news is different, the narrative is different. It’s not a coincidence. Be a cyclist.”
Analysts say the multi-month correction is over
Further insight into this trend reversal following a 3-month correction was provided by technical analyst and pseudonymous Twitter user ‘CryptoBirb’, who posted the following chart detailing the range-bound trading for BTC over the past year stating “with a bit of luck, Bitcoin may see follow-through to the upside, even beyond $50,000.”
BTC/USD 1-week chart. Source: Twitter
Should BTC manage to hold its momentum at these levels, “Bitcoin has near targets of $46,300 – $46,500.”
CryptoBirb said,
“The most important line in the sand is defined at $51,000 by the price action of Bitcoin. That level could be expected to work as a magnet for BTCUSD if we are to see follow-through to the upside.”
Related:Bitcoin rejects sell-off as 7.5% US inflation fails to keep BTC down for long
BTC price decouples from equities
The bullish performance seen across the cryptocurrency markets in February was addressed in comments by Dalvir Mandara, a quantitative researcher at Macro Hive, who noted that the “impressive gains” have come “on the back of markets digesting increased Fed hawkishness and pricing in more hikes, as well as the ECB pivoting to potential hikes in 2022.”
According to Mandara, the fact that the crypto market has been able to rally higher despite tighter than expected liquidity conditions “suggests macro factor may be affecting them less than before.”
Mandara pointed to Bitcoin’s correlation to tech stocks, which has now “fallen from the highs of 75% last week to 50% this week” as evidence for this shift in impact on the BTC price.
Rolling 30-day correlation between BTC and NASDAQ. Source: Macro Hive
Mandara said,
“Overall, we still think the macro backdrop is negative for crypto but on-chain/flow metrics have turned more positive so we are moderately bullish on balance.”
The overall cryptocurrency market cap now stands at $1.996 trillion and Bitcoin’s dominance rate is 41.9%.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Hope for the possibility of another significant rally in the cryptocurrency market has returned, even though Bitcoin (BTC) rejected at $45,500. Currently, bulls are looking to shore up their defense at the $43,000 support level.
Data from Cointelegraph Markets Pro and TradingView shows that after making a run to a weekly high at $45,500 early on Tuesday, bears managed to drop the price of BTC to $42,900 during afternoon trading as investors realized profits and prepare to place bids around $38,000.
BTC/USDT 1-day chart. Source: TradingView
Here’s a look at what analysts are saying sparked the rally in BTC price over the past week and what levels to keep an eye on moving forward.
Legitimate breakout or a short squeeze?
The sudden move higher caught many traders off guard as headlines across the crypto space were predicting the onset of an extended bear market, but such dire warnings may have been premature based on data from a recent report from Glassnode. The blockchain analysis firm stated that “prices have bounced off a number of fundamental levels that have historically signaled undervaluation or a ‘fair value’ price.”
Through analyzing the data of liquidations on futures exchanges, Glassnode surmised that while the Long Liquidation Dominance charts “show that shorts have been on the back-foot this week, with a minor skew towards short side liquidations,” the lackluster magnitude of this metric indicates “that it is unlikely that price upside is being primarily driven by a short squeeze.”
Bitcoin futures open interest daily change. Source: Glassnode
Glassnode noted that during previous instances of major price declines, the futures open interest (OI) saw significant drawdowns or “de-leveraging events” as shown by the large downward red spikes on the graph above, a feature which is noticeably absent from this latest price decline.
Glassnode said,
“This may indicate the probability of a short squeeze is lower than first estimated, or that such an event remains possible should the market continue higher, reaching clusters of short seller stop-loss/liquidation levels.”
“We’re still in a traders’ market”
The forces in the wider financial markets that are impacting Bitcoin price were addressed by David Lifchitz, managing partner and chief investment officer at ExoAlpha, who highlighted the recent correlation between BTC and tech-stocks and questioned what it will take for “Bitcoin to get its destiny back in its own hands.”
According to Lifchitz, “stocks are still in ‘la-la-land’ whereas bonds are more in reality,” helping to provide a clearer picture as to the strength of the global financial markets based on the fact that “bonds tend to lead the way for stocks, and bonds are already struggling.”
When it comes to what comes next for BTC, Lifchitz offered reassuring words for bulls worried about the large head and shoulders pattern on the BTC chart, stating that the pattern was “invalidated by the recent bounce in BTC price.”
Moving forward, Lifchitz identified the near-term targets for Bitcoin at $48,000, $51,000 and $53,000 but warned that there is a possibility for a “pullback to the mid/high $30,000s” before hitting $53,000.
Lifchitz said,
“In the meantime, we’re still in a traders’ market with opportunities to grab a few points here and there between the soft targets: profits should be quickly taken off the table on each small pullback, then rinse, repeat. Without any macro catalyst, it’s hard to see Bitcoin trend much higher in a straight line.”
Related:DoJ seizes $3.6B in crypto and arrests two in connection with 2016 Bitfinex hack
Bitcoin is “the Amazon of our time”
A final bit of insight into the price action for Bitcoin as it compares to the growth of Amazon stock price was offered by analysts at Macro Hive, a financial market research outlet that considers Bitcoin to be “the Amazon of our time.”
Macro Hive highlighted that “even Amazon suffered large drawdowns that took years to recover from” and they suggested that “your exposure to Bitcoin needs to be appropriately sized so that you can survive 50% to 80% drawdowns.”
Amazon stock price performance. Source: MacroHive
MacroHive said,
“But major drawdowns also provide good entry levels for exposure. Our metrics suggest that we are getting closer to that point, so we would consider accumulating exposure. However, we would not go max long in an environment of rising central bank rates and falling global growth momentum.”
The overall cryptocurrency market cap now stands at $1.949 trillion and Bitcoin’s dominance rate is 41.7%.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
The crypto market is once again in the red on Feb. 2 as global financial markets continue to see increased volatility.
Data from Cointelegraph Markets Pro and TradingView shows that after spending the morning hovering around $38,200, BTC was hit with a wave of selling that pushed the price to $36,800.
BTC/USDT 1-day chart. Source: TradingView
Here is what several analysts and traders are saying about Wednesday’s Bitcoin price action and what areas to keep an eye on moving forward.
Bulls are in trouble below $36,700
Insight into the major support and resistance zones of note for Bitcoin was provided by crypto trader and pseudonymous Twitter user ‘HornHairs’, who posted the following chart indicating a solid level of support near $37,400.
BTC/USDT 1-hour chart. Source: Twitter
According to the analyst, after finding support at this level, “a move back to $38,000s is just a bearish retest unless we can reclaim $38,700.”
That being said, a bearish move could see the price continue to slide lower with the chart above indicating that bulls are in trouble below $36,781.
HornHairs said,
“A drop below $36,700 and a move to take out range low seems likely, seeing as we took out the range high yesterday.”
Will the fourth attempt be the charm?
A look at the descending price action for BTC since topping out in November was provided by crypto trader and pseudonymous Twitter user ‘Daan Crypto Trades’, who posted the following chart highlighting the difficulty Bitcoin has had at breaking above this trend.
BTC/USD 1-day chart. Source: Twitter
Daan Crypto Trader said,
“Everyone seems to be watching this same line now which could cause for some fakeouts. So be cautious for that. It’s currently testing the diagonal for the 4th time. When will it break?
Related:BTC price dives with stocks as fresh sell-off sees PayPal shed nearly 25%
“A fully intact bull market that is consolidating”
A forward-looking analysis on what could come next for Bitcoin was summarized by technical analyst and pseudonymous Twitter user ‘Decodejar’, who posted the following chart outlining a possible move lower for the top cryptocurrency.
BTC/USD 1-day chart. Source: Twitter
According to Decodejar, this is a common chart being circulated by analysts which shows a “bearish ABC wave 4 expanded flat, ending below last year’s lows.”
While this is a common pattern, Decodejar indicated that “there’s not much volume for an impulse” and he doesn’t “think we break last year’s lows.”
Decodejar said,
“What this all boils down to is that the correction is likely almost done at these levels, even if the market needs more time. What I do not see is a bear market, in fact, I am sick of hearing it. I see a fully intact bull market that is consolidating.”
The overall cryptocurrency market cap now stands at $1.729 trillion and Bitcoin’s dominance rate is 41.1%.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Bitcoin (BTC) price continues to flash mixed signals, raising uncertainty among investors and negatively impacting asset prices across the market.
Data from Cointelegraph Markets Pro and TradingView shows BTC price pinned below $36,000 and even though crypto and equities markets underwent a brief relief rally on Wednesday, comments from the recent FOMC meeting appear to be settling in as investors internalize the fact that interest rate hikes are on the way.
BTC/USDT 1-day chart. Source: TradingView
Here’s a look at what analysts and traders are saying about Bitcoin’s most recent price action and the macroeconomic factors impacting the wider crypto market.
A year of “range bound” trading
The long-term range-bound trading that BTC has been in since early 2021 was addressed by Mike McGlone, Senior Commodity Strategist for Bloomberg Intelligence, who posted the following chart and asked, “What ends Bitcoin, Ethereum range trade?
BTC/USD 1-week chart. Source: Twitter
According to McGlone, the key to escaping the current range are the “bullish fundamentals” that back the underlying strength of Bitcoin.
McGlone said,
“By the rules of economics, a market with rising demand and declining supply will go up over time, suggesting that Bitcoin may be forming a bottom again around $30,000 as $60,000 resistance ages.”
The Fed continues to add downside risks
A deeper analysis on the impact of Wednesday’s Federal Reserve meeting was provided by Bilal Hafeez, CEO and head of research at Macro Hive, who noted that the tone of the meeting “turned out to be more hawkish than expected.”
Hafeez pointed to the decision by the Fed to raise the inflation forecast as a sign that the central bank has realized that “they need to be more hawkish than before,” and he highlighted Powell’s comments that “this cycle would be different to the last cycle, which suggests faster hikes than before.”
With that being said, Hafeez indicated that the Fed “has not decided on a path yet,” and noted that Powell “didn’t give much additional information on quantitative tightening except that it would operate in the background.”
Hafeez said,
“Overall, the Fed is comfortable with equity and risk markets selling off as it tightens financial conditions and so could reduce inflation. Bond yields have risen after the meetings, equity and crypto markets have given back gains. The Fed continues to add downside risks to risky markets.”
Related:Derivatives data suggests that Bitcoin’s $39K bounce was a mere blip
Short-term weakness, long-term strength
The near-term outlook for BTC was briefly touched upon by derivatives traders and pseudonymous Twitter user ‘Crypto McKenna’, who posted the following chart and stated that “BTC price action is about to get very boring.”
BTC/USD 6-hour chart. Source: Twitter
McKenna said,
“No trade season for the next 10-20 days in my opinion.”
Despite this projection for near-term weakness and sideways price action, the long-term outlook continues to brighten for multiple reasons, as noted in the following Tweet from crypto analyst Will Clemente.
Bitcoin price weakness because of risk-off behavior while fundamentals strengthening: Intel creating mining chips, Russia looking to get involved in mining, Goldman Sachs bullish, Google partnership w/ Coinbase, El Salvador Bond.
Hard to think asymmetry is to the downside.
— Will Clemente (@WClementeIII) January 27, 2022
The overall cryptocurrency market cap now stands at $1.663 trillion and Bitcoin’s dominance rate is 41.5%.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Bears remain in full control of the cryptocurrency market on Jan. 24 and to the shock of many, they managed to pound the price of Bitcoin (BTC) to a multi-month low at $32,967 during early trading hours. This downside move filled a CME futures gap that was left over from July 2021.
Data from Cointelegraph Markets Pro and TradingView shows that the $36,000 level was overwhelmed in the early trading hours on Monday, leading to a sell-off that dipped below $33,000 before dip buyers arrived to bid the price back above $35,500.
BTC/USDT 1-day chart. Source: TradingView
Here’s a look at what several analysts are saying about the macro factors at play in the global financial markets and what to be on the lookout for in the months ahead.
“Rate hikes don’t kill risk assets”
For several weeks the dominant conversation in U.S. financial markets has been the prospect of up to four interest rate hikes by the Federal Reserve over the course of 2022, which many people have claimed will put an end to the current bull market.
But according to financial analyst and pseudonymous Twitter user ‘Tascha,’ this is a common misconception because “rate hikes don’t kill risk assets.”
Tascha said,
“Reversal of quantitative easing does. Check what happened to stocks 2015 and 2018 when Fed turned off the tap.”
Further insight into Tascha’s tweet was provided in the following reply from pseudonymous Twitter user RK Maruvada.
Is it time to think about a bottom?
A bit of hope for the crypto faithful was provided by technical analyst and Bollinger Bands creator John Bollinger, who posted the following tweet suggesting that “it’s time to start thinking about a bottom in cryptos.”
It’s time to start thinking about a bottom in cryptos. However the ability to get outside the lower Bollinger Band repeatedly strongly suggests a retest of some sort will be needed. My plan is wait for a bottom and a bounce, then look for a retest as an entry. $btc, $eth, $ltc…
— John Bollinger (@bbands) January 24, 2022
While the well-known analyst thinks that the market may be in the general area of a bottom, caution is still warranted and a bounce followed by a retest is needed before looking to enter a long position in BTC.
Related:Bitcoin ‘enters value zone’ as BTC price floor metric goes green again
Opening a Bitcoin long “looks attractive here”
A final bit of analysis was provided by macro strategist and Delphi Digital co-founder Kevin Kelly, who indicated that “the big question now is where will the next wave of demand come from and what level do we need to hit for it to trigger such bids?
BTC/USD 1-day chart. Source: TradingView
According to Kelly, “the mid-to-high $30,000s for BTC is a safe bet,” especially due to the widely held belief by many that Bitcoin could see a “run up to $70,000.”
This would mark a 75% gain from the current levels, which “large capital allocators would salivate at the opportunity to capture” from Kelly’s view, “even if it takes a year or longer to realize such gains.”
Kelly said,
“That is why we firmly believe BTC looks attractive here for those with a long enough time horizon, especially when compared to traditional alternatives to park your capital.”
This sentiment that BTC is at a good level for a long was also echoed in the following tweet by cryptocurrency analyst and Twitter user Will Clemente.
Don’t think asymmetry is skewed to the downside for BTC here.
For the long term investor this is a good area to DCA in some heavier buys IMO.
— Will Clemente (@WClementeIII) January 24, 2022
The overall cryptocurrency market cap now stands at $1.594 trillion and Bitcoin’s dominance rate is 41.9%.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Bitcoin (BTC) price continues to sell-off and the knock-on effect is an even sharper correction in altcoins and DeFi tokens. At the time of writing, BTC price has sank to its lowest level in 6 months and most analysts are not optimistic about an immediate turn around.
Data from Cointelegraph Markets Pro and TradingView shows that a wave of selling that began late in the day on Jan. 20 continued into midday on Friday when BTC hit a low of $36,600.
BTC/USDT 1-day chart. Source: TradingView
Here’s a check-in with what analysts have to say about the current downturn and what may be in store for the coming weeks.
Traders expect consolidation between $38,000 and $43,000
The sudden price drop in BTC has many crypto traders predicting various dire outcomes along the lines of an extended bear market. Others like independent market analyst ‘Rekt Capital’, are not so quick to jump the gun and declare that all is lost.
As shown in the following chart posted by Rekt Capital, “the recent BTC rejection means that BTC is now residing at the lower region of its current $38,000-$43,100 range.”
BTC/USD 1-week chart. Source: Twitter.
According to Rekt Capital, “Bitcoin is just consolidating inside the $38,000-$43,100 range,” but needs to hold this support level to avoid dropping down into a lower consolidation range.
Rekt Capital said,
“Technically, the $38,000 support area is what separates BTC from entering the $28,000-$38,000 consolidation range. Bitcoin last consolidated in said range in Q1 and Q2 of 2021.”
Head and shoulders pattern confirmed
Analysis of the BTC price action from a purely technical point of view was touched on by David Lifchitz, managing partner and chief investment officer at ExoAlpha, who pointed out that the “giant head and shoulders pattern for BTC is now completed with the neckline broken with BTC at $38,300.”
BTC/USDT 1-day chart. Source: TradingView
From a theoretical standpoint, Lifchitz noted that this pattern predicts a possible drawdown as low as $20,000, but he stated that the “fall has generally been less than that” and suggested that “the $31,000 region could definitely be in sight.”
From a fundamental point of view, Lifchitz noted multiple factors that are creating headwinds for BTC, including tightening from the U.S. Federal Reserve, chatter from the EU regulators looking to ban proof-of-work mining, profit-taking from late 2021 and the continued uncertainty about the economic future as it relates to the Covid pandemic.
Lifchitz said,
“Therefore for Bitcoin, a move down to the low-mid $30,000 could be definitely in the cards soon before real dip-buyers show up.”
Traders look to scoop up BTC at $30,000
A look at how traders have responded to this drawdown as compared to the pullback in June of 2021 was provided by analyst and Cointelegraph contributor Michaël van de Poppe, who posted the following chart highlighting the major support zones for each period of weakness.
BTC/USD 1-day chart. Source: Twitter
van de Poppe said,
“Back in June → People are waiting for $23,000 to $25,000 to buy. Right now → People are waiting for $30,000 to buy. Similar fake breakout on the upside to nuke afterward into support.”
A similar point of view was offered by trader and pseudonymous Twitter user ‘Fomocap’, who posted the following chart outlining how BTC could perform in the days ahead.
BTC/USD 1-day chart. Source: Twitter
Fomocap said,
“Relief bounce to $44,000 – $42,000 retest, if rejection then $35,000 – $33,000. What do you think?”
Related:Crypto Twitter responds to Bitcoin dump: ‘Ok cool’
Bulls need a close above $39,600
A final bit of insight into was offered by crypto trader Scott Melker, who posted the following chart showing the price breakdown below a key level that must be recovered.
BTC/USD 1-day chart. Source: Twitter
Melker said,
“Bulls looking for a Hail Mary close above $39,600 on the daily. A close below (especially on weekly) is a break in market structure, lower low etc. Bears showing no mercy.”
The overall cryptocurrency market cap now stands at $1.801 trillion and Bitcoin’s dominance rate is 40.4%.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Bitcoin price made a quick pop above $43,100 in the U.S. trading session but uncertainty is still the dominant sentiment among traders on Jan. 11 and bulls and bears are split on whether this week’s drop to $39,650 was BTC’s bottom.
Data from Cointelegraph Markets Pro and TradingView shows that the price of Bitcoin (BTC) has traded tightly around the $42,000 level as the global financial markets digested U.S. Federal Reserve Chair Jerome Powell’s statements on the upcoming fiscal policy changes.
BTC/USDT 1-day chart. Source: TradingView
Powell indicated that the central bank is prepared to “raise interest rates more over time” if inflation continues to persist at high levels, but analysts were quick to note further comments suggesting that a low interest environment could persist for some time.
It’s possible that traders may have interpreted these comments positively and while it is not possible to connect Powell’s comments to direct price movements, BTC did manage a quick surge above $43,000.
Powell said,
“It is really time for us to move away from those emergency pandemic settings to a more normal level. It’s a long road to normal from where we are.”
Here’s a look at the ongoing debate on whether the crypto market is positioned to head higher in the coming days.
Bulls call the bottom
The crypto market is well known for its volatility and history of extensive drawdowns after new all-time highs have been established, a characteristic highlighted by pseudonymous Twitter user ‘ChrisBTCbull’.
Cryptocurrency drawdown percentage from 2021 highs. Source: Twitter
This across-the-board drawdown saw BTC fall by nearly 40%, while Dogecoin (DOGE) is down 79% from its highs, but according to bullish analysts, recent technical developments suggest that the market has reached a bottom.
According to crypto analyst and Twitter user Will Clemente III, Bitcoin is “entering the Buy Zone on Dormancy Flow” as highlighted on the following Bitcoin entity adjusted dormancy flow chart, which “essentially compares price to spending behavior.”
“This bottoming signal has only flashed 5 times before in Bitcoin’s history.”
Related:Bitcoin price surges to $43K, but traders warn that ‘real pain’ is due for altcoins
A Death Cross looms
Despite today’s spike to $43,100, many analysts are pessimistic about Bitcoin’s short term prospects and caution that a potential “death cross” on the the daily chart has historically been a strong bearish indicator.
As shown below, the 50-day moving average for is perilously close to falling below the 200-day moving average, a convergence which in the past resulted in sharp price declines.
BTC/USD 1-day chart. Source: Twitter
Bitcoin Archive said,
“Bitcoin is approaching the “Death Cross.” The last time this happened in June the price dropped 20% more over 31 days. That would take us down to $34K by the 9th of Feb if this repeated.”
As for the altcoin market, the recent price weakness in the USD and BTC pairs was addressed by analyst and pseudonymous Twitter user ‘Pentoshi’, who posted the following tweet suggesting a more bearish performance in the near term for alts.
Im pretty bearish alts. The hilarious part is the people replying to me with their alts which are in downtrends on both usd/btc pairs. The point of the bounces is to get you to chase into your lower highs
I still believe Btc is in a downtrend. Bc it is. Which is why LH expected
— Pentoshi DM’S ARE SCAMS (@Pentosh1) January 11, 2022
For the time being, traders appear content to play the waiting game to see if the crypto market reverses course of stays range-bound for the foreseeable future.
The overall cryptocurrency market cap now stands at $1.998 trillion and Bitcoin’s dominance rate is 40.3%.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Global financial markets, stocks and cryptocurrencies took a knock on Jan. 10 after rumors that the Federal Reserve may hike interest rates four times in 2022 circulated and sparked a sell-off and sent the benchmark 10-year Treasury yield briefly above 1.8%.
Data from Cointelegraph Markets Pro and TradingView shows that a massive wave of selling broke Bitcoin’s (BTC) support near $42,000, resulting in a plunge to $39,660 before buyers stepped in to buy the perceived dip.
BTC/USDT 1-day chart. Source: TradingView
Here’s what analysts are saying about this latest drawdown in BTC and what could possibly come next as analysts watch to see what the impact of the Fed’s easy money policies ending means for risk-on assets.
A shrinking money supply is bad for Bitcoin
The Fed’s shifting monetary policy is generating significant challenges for risk-on assets but this was anticipated by analysts at Delphi Digital who noted that the headwinds facing BTC and the crypto market have more to do with “tighter liquidity conditions and heightened market volatility” than with rate hikes.
According to Delphi Digital, “the macro tailwinds that helped propel BTC and crypto assets to new highs over the last 12–18 months have reversed course” as highlighted in the following chart showing that the global M2 supply topped out near March of 2021 and has been on the decline since then.
Bitcoin price vs. Global M2 Supply. Source: Delphi Digital
The peak in M2 supply came around the same time that Bitcoin set a new all-time high in early 2021 and was followed by a drawdown below $30,000 over the next couple of months.
Despite the late 2021 resurgence in BTC which once again established a new high at $68,789 in November, the continued drop in M2 supply has taken its toll on the market, which has been exasperated by the Fed sharing its plan to accelerate its timeline for raising interest rates.
Delphi Digital said,
“The shift away from excess liquidity and accommodative monetary conditions is a structural headwind we’ve highlighted in recent months, which now appears to be coming to a head.”
The talk of higher interest rates has also breathed new life into the U.S. dollar, which Delphi Digital noted “does little favor to assets like BTC, which tends to move inversely with USD.”
BTC/USD vs. DXY Index (Inverted). Source: Delphi Digital
Delphi Digital said,
“We continue to stress how important the U.S. dollar is in determining the direction of global markets, especially assets tethered to the currency debasement narrative.”
Related:Bitcoin drops below $40K for first time in 3 months as fear set to ‘accelerate’
“A good buying opportunity”
Analysis on the current chart structure for BTC was offered by analyst and pseudonymous Twitter user ‘Resolute’ who posted the following chart highlighting the 42.5% decrease in BTC price from its highs in November.
BTC/USDT 2-day chart. Source: TradingView
Resolute said,
“Conceivably a double bottom from the September 2020 low, after retracing Q4s move up. Currently trading below the 2d 200 EMA, which has historically been a good buying opportunity.”
Resolute’s observation that this may be a good area of accumulation was echoed by cryptocurrency trader and Cointelegraph contributor Michaël van de Poppe, who posted the following tweet indicating a preference for opening a long as opposed to shorting the current market.
I’d rather long than short here for #Bitcoin. pic.twitter.com/QUc8n58b8K
— Michaël van de Poppe (@CryptoMichNL) January 10, 2022
The overall cryptocurrency market cap now stands at $1.192 trillion and Bitcoin’s dominance rate is 40.9%.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
