Bitcoin failed to post gains overnight, losing more ground on Wednesday as it continued to its worst month since May.
The volatile coin was trading down 1.3% at $46,965 as of 7:48 am on Wednesday in New York, after a loss of nearly 7% in the previous session. According to tracker CoinGecko, it is down about 18% this month, while the broader crypto universe has shed around $420 billion in market value over the period.
Demand for the most speculative investments has subsided as 2021 draws to a close, as the Federal Reserve pulls back on extraordinary stimulus that helped lift a variety of assets this year. Some analysts say the reversal will be brief.
“I suspect the year-end book in thin market conditions has pushed the range,” said Jeffrey Haley, a senior market analyst at OANDA. “There is nothing to suggest that bitcoin’s recent $45,000 to $52,000 is in danger.”
On Wednesday, other coins were also hit hard, according to CoinGecko, with Cardano and Solana down more than 8% each, and Polkadot down nearly 6%.
Strategists are monitoring key technical levels for clues about the direction of bitcoin.
Katie Stockton, founder and managing partner of Fairlead Strategies, an independent research firm focused on technical analysis, said that the next support level for bitcoin is around $44,200, based on a Fibonacci retracement.
The coin’s volatility this month has reduced its year-on-year climb to nearly 65%, which is still ahead of traditional assets including global equities and commodities.
Crypto followers expect bitcoin to resume its progress and hit a record high of $69,000 last month. Among their arguments is the controversial idea that tokens provide a hedge against inflation.
“The arc of history is long,” Graham Jenkin, chief executive officer of crypto exchange Coinlist, said on Bloomberg television. “Bitcoin is going to become a better asset to invest in over time.”
It could be that the drop in trading volume during the Christmas holidays is exacerbating the price volatility.
“Although I’m going to go out on a limb and classify it as low-volume, holiday-season funk,” Mati Greenspan, founder of market analysis, advisory and money management firm Quantum Economics, said, referring to the recent performance.
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