Bitcoin is in danger of breaking its longest winning streak in more than four months as traders question whether the bounce from recent lows was too sharp, too soon.
The world’s largest digital currency by market cap was trading down 2.6% on Tuesday at $42,953, mostly with little change. Other tokens also declined, with the 100 coin index losing 2.3% at one point.
This follows a huge start to the week that saw bitcoin cross above $44,000.
“Today’s pullback is due to some profit taking after a big move,” said Matt Malee, chief market strategist at Miller Tabak + Co. Bitcoin had gained about 38% on an intraday basis in less than two weeks, so I think it is for traders to take some short-term profits.”
He added that bitcoin has moved above its trend line from its November highs, so there is plenty of room to take respite in the near term without disrupting its recent advances.
Analysts have noted that cryptocurrencies have recently been moving in tandem with other riskier assets, including US stocks – and that correlation was evident in January, when both asset classes saw a lot of volatility, a report by US crypto exchange Kraken said. according to the report.
“With a sharp turnaround from the Fed, continued Omicron fears, low stock valuations and inflation fears at a decade high, crypto remains vulnerable to deriving, equity markets correct in the coming months,” the report said. should be.”
Katie Stockton, founder and managing partner of Fairlead Strategies, is tracking something called the monthly MACD momentum gauge for bitcoin. That measure had been showing “buy” signals since July 2020, but crossed over to “sell” in late January, he noted in Fairlead’s “Cryptocurrency Compass” report.
“This tells us that this year could see more volatility, and it means we need to be more short-term oriented over the long-term,” she said.
Amid its progress this week – which saw the coin move above its 50-day moving average, bitcoin found resistance at $45,000, which also happened to be in an area where it broke the upper band of its trading envelope. This usually suggests that the rally went too far, too quickly.
Brian Nick, Nuven’s chief investment strategist, said over the phone, “One thing that doesn’t hold for crypto is that there can be a relatively fixed group of investors and those investors are themselves expecting something less liquid. ” “There’s not going to be unlimited liquidity from the Fed anymore, and if we have a money-supply contract, if we have interest rates going up, that’s going to make things like crypto less attractive.”
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