Best of Bitcoin’s Latest Rally Is Over. Watch This Key Level for the Next Move.
Bitcoin
and other cryptocurrencies were down on Thursday but had still consolidated gains from one of the best digital asset stretches in more than two years on hopes of more accommodative monetary policy from the Federal Reserve.
Bitcoin’s price has fallen 1.5% to below $24,500 in the last 24 hours. Bitcoin is still up almost 50% so far this year – after rebounding from a bearish slump last week after falling below $20,000 – but it has rebounded from a peak above $26,000 on Tuesday, which marking the highest level since the crypto crash accelerated last June.
“We still see a tug of war near $25,000,” said Alex Kuptsikevich, an analyst at brokerage FxPro. “Prices bounce back below the 200-week moving average and don’t rise immediately. Technically, a key signal of a return to a long-term uptrend would be a consolidation above $25,000 by the end of the week. Still, holding the price above $20,000 and the 200-day moving average seems a sufficient condition that bitcoin is not ready to continue falling sharply and remains interesting to buy on dips.”
Crypto prices have soared amid a crisis of confidence across the US banking sector. While the failures of Silvergate Capital, Silicon Valley Bank and Signature Bank as of last week have important implications for the digital asset industry and the functioning of crypto markets, traders have grown optimistic for another reason.
In particular, the collapse of Silicon Valley Bank — the biggest bank failure since the 2008-2009 financial crisis — has fueled bets that the Fed will not hike rates as much in the coming months as once expected. Higher interest rates have wiped out bitcoin prices over the past year as the Fed has tried to rein in decades of inflation with tighter financial conditions. But recent bank strains, an unintended consequence of the interest rate environment, have fueled speculation of a more dovish Fed.
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A rate cap and even the prospect of rate cuts this year would be a major tailwind for Bitcoin as higher rates dampen demand for riskier bets like cryptos. While
Dow Jones industry average
And
S&P500
have slipped amid banking woes – with bitcoin uncorrelating with the stock market – tech stock bias
Nasdaq,
which is similarly sensitive to interest rate expectations has been more resilient.
Still, markets were largely sold-off on Wednesday on fears that the US banking panic could spread globally, with shares in Swiss bank Credit Suisse (Ticker: CS) selling off dramatically. Bitcoin couldn’t escape the short-term selling pressures, hence the move lower into Wednesday and into Thursday.
“Bitcoin weakened as the chaos on Wall Street saw another banking crisis sparking another wave of panic selling of risky assets. Credit Suisse is a bigger story than SVB and that makes Wall Street extremely nervous,” said Edward Moya, an analyst at broker Oanda. “Banking turmoil could ultimately prove quite bullish for bitcoin, but for now, crypto weakness is warranted.”
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The focus ahead of the next Fed decision on interest rates, due next week following the March 21-22 meeting of the central bank’s policy-setting committee, are any signs of increased stress in the banking system, as well as economic data that are showing the inflation picture to dye .
Beyond Bitcoin,
ether
— the second largest cryptocurrency — lost 3.5% to just under $1,650. Smaller cryptos or altcoins have been even weaker
Cardano
crumbles 5% and
polygon
8% collapse. Memecoins were also firmly in the red, with
Dogecoins
down 7% and
Shiba Inu
8% fall off.
Write to Jack Denton at [email protected]