Bitcoin lost steam on Wednesday, pausing a bull run that had accelerated on the backs of Tesla’s $1.5 billion investment and optimism over a massive stimulus package in the United States.
The benchmark cryptocurrency closed marginally higher by 0.14 percent on Tuesday, forming a Doji candle that shows an imminent bias conflict in the market. Today, during the Asian session, Bitcoin showed signs of bearish reversal (short-term) after dipping by more than 1 percent to hit an intraday low near $45,666.
At its highest, the cryptocurrency was trading at $48,200 in a follow-up to its 20 percent rise on Monday.
The reversal came despite the euphoria surrounding Tesla’s consideration of Bitcoin as an alternative to cash, a narrative that bulls had pushed for years. Also, US President Joe Biden’s pressure on Congress to pass a $1.9 trillion stimulus aid avoided offering tailwinds to the Bitcoin price rally.
Headwinds Appear, Nonetheless
In a note to investors, JPMorgan & Chase strategists led by Nikolaos Panigirtzoglou said Tesla’s bitcoin bet would not result in copycat investments from other major corporates. They argued that the cryptocurrency is still too volatile to replace cash as a store-of-value asset effectively.
Jerry Klein, managing director at New York-based investment management firm Treasury Partners, also noted Tesla’s move makes no sense. In an interview with the Financial Times, the Wall Street professional noted that corporates are willing to accept a low return rate via cash than to balloon their risks by investing in Bitcoin.
“I don’t think there is a case to be made for investing corporate cash in a risky asset like bitcoin, where they could experience significant declines.”
Meanwhile, many analysts within the cryptocurrency space expressed their risk-aversion bias towards Bitcoin, with independent technical chartist Kevin Cage hoping to see the price at $74,000 but still warning about a major downside pullback should the rally fail to mature.
“It won’t last forever, but I hope we get a few more months of PUMPS,” the analyst tweeted Wednesday.
Bitcoin at $40K?
A dissenting outlook over Tesla’s investment into the Bitcoin market appears to have counterbalanced the ongoing bullish euphoria. Traders typically use these periods to withdraw their profits and wait for another dip to repurchase the underlying asset.
For instance, after PayPal announced in October last year that it would enable bitcoin services on its platform, the cryptocurrency surged by over 60 percent within the next month—from $11,900 to $19,469. Nevertheless, it later underwent a 16.92 percent downside correction on profit-taking sentiment.
Bitcoin later bounced back after spotting a support level near its 20-day exponential moving average (the green wave in the chart above). The cryptocurrency stretched its rebound to a new all-time high just yesterday, led by Tesla. It could now attempt to undergo a similar, healthy correction towards the green wave. It sits near $40,000.
Traders speculate that Bitcoin’s price may continue to trade sideways for now
Cointelegraph By Benjamin Pirus
Bitcoin’s price has declined in recent days. While it has rebounded from its weekly lows, the asset’s trajectory remains uncertain says CryptoWendyO, a crypto trader on Twitter.
“The daily timeframe is not looking great as we are having trouble sustaining $50K,” she told Cointelegraph on Friday. “I am feeling like we will get a run to $51.6[K].”
“From there I would be cautious as rejection could lead back to the $50K -$45K range. A break down there could be a swift wick to $42-38K with a glorious recovery. Invalidation would be a sustained consolidation at $52K.”
After hitting record highs of approximately $58,360 in February, Bitcoin (BTC) dropped down to roughly $43,015 in subsequent days, based on TradingView data. The asset then rebounded up to about $52,660, before continuing its downward price action below $50,000. Bitcoin is trading at roughly $49,020 at time of publication.
Cheds, a trader on Twitter holding his CMT level I certification, expects “more consolidation from BTC above that key 42k level,” he told Cointelegraph on Friday. He also tweeted a chart of his range expectations.
“The big question is if the recent 27% correction is enough to bring us to a new high,” Cheds said. “In the meantime we will watch a tightening range on the daily of lower highs and higher lows.”
A number of technology stocks have also suffered price decline recently.
Buying Bitcoin Couldn’t Save MicroStrategy Shares From 50% Crash
Bitcoin price has had one of its largest corrections since the bull market began, and has since struggled to reclaim $50,000. But the scenario is nowhere near as bad for the cryptocurrency as it is for one of its biggest supporters.
Although the company’s share price had benefitted initially from buying BTC, it wasn’t enough to fend off profit-taking and an eventual now 58% correction in MicroStrategy. Here’s why this could be happening, and what it could also say about the current crypto market trend.
MicroStrategy Shares Fall 50% After Buying More And More BTC
One of the biggest catalysts kickstarting Bitcoin’s most recent bull run, was undeniably when MicroStrategy first revealed it had purchased a sum of BTC to add to its corporate treasure reserves. From then on, others have followed suit, and CEO Michael Saylor has doubled, and tripled down on his initial purchase.
The price per BTC has risen accordingly, from just above $10,000 to nearly $50,000 currently. Along with the price of Bitcoin, MicroStrategy shares have risen almost as sharply as investors used the company to gain exposure to the cryptocurrency, and also bet big on the reemerging brand as well.
RELATED READING | ONE YEAR LATER: BITCOIN EMERGES AS “THE STIMULUS ASSET”
But as Bitcoin started correcting amidst an uneasy macro environment, MicroStrategy stock shares have fallen by 58%. The chart appears to show a parabola that’s now broken, suggesting that the correction isn’t nearly finished.
MicroStrategy has nosedived by more than 50% since an early Feb peak | MSTR on TradingView.com
Could Bitcoin Fall Fate To The Saylor Effect?
As for why MicroStrategy is taking such a beating, it could be due to stock market jitters, that have most left the crypto market unscathed. However, it could be a sign of what’s to come instead.
The orange line superimposed behind the MicroStrategy chart above, is the BTCUSD price chart from Coinbase. Not every peak and trough has followed perfectly, but the path is close enough to suggest there could be some correlation between the two.
If there is a correlation, either Bitcoin is about to correct another 20 to 25%, or there’s something else afoot. As for what other reasons could exist for the divergence, it could come down to more ways to become exposed to BTC now existing in traditional markets than there was a year ago.
RELATED READING | HOW LASER EYES COULD HAVE BITCOIN INVESTORS SEEING RED
Another alternative is that CEO Michael Saylor’s BTC buying spree could be starting to be viewed as irrational, and former believers are now jumping ship. Saylor, who now adorns “laser eyes” on Twitter is one of the cryptocurrency’s biggest supporters, but doesn’t always place bets at the right time – even though the technology itself he bets on is a sure thing.
Saylor was once deemed the biggest loser of the dot com bubble, but ultimately the internet became widely adopted. Few argue that Bitcoin will eventually do the same, but could this scenario that hit Saylor in the past be playing out once again?
Featured image from Deposit Photos, Charts from TradingView.com
Bitcoin Support at $47K “Very Strong,” Glassnode CTO Asserts After Price Falls
Bitcoin has an extreme potential to hold $47,000 as its support level, according to Rafael Schultze-Kraft, the co-founder/CTO of blockchain analytics platform Glassnode.
The data scientist studied the number of existing bitcoins that moved within the said price bucket and placed it against other price levels. He noted that the “UTXO Realized Price Distribution” near the $47,000-level was comparatively higher than the rest in recent times, stressing that the range prompted the Bitcoin network participants to become more active than usual.
In retrospect, a higher number of coins moving near a specific level signifies more trades. It is possible that traders and investors sold or bought more bitcoins near $47,000 than any other level around it. Given the cryptocurrency’s recent uptrend, it is safe to assume that most trades near $47,000 had a bullish outlook, which made the level ideal support for Bitcoin.
“[We have a] very strong on-chain support at $47k – around 500,000 BTC have been moved at that level,” noted Mr. Schultze-Kraft. “It is important that we hold it; otherwise, we could see low forties quickly before the next upwards movements.”
Offsetting Yield Fears?
The statements appeared as Bitcoin bled through an unaccustomed macroeconomic environment. The benchmark cryptocurrency was among the biggest losers this Thursday as Federal Reserve Chairman Jerome Powell ignored offering any future guidance on rising bond yields in the US.
Bitcoin closed the previous session 3.95 percent lower and opened Friday declining further as it logged an intraday low near $46,219. The cryptocurrency pushed against bearish attempts and attempted a recovery above $47,000. At press time, it was still wobbling around the so-called on-chain support level.
Traders anticipated that Mr. Powell would boost the Fed’s bond-buying program to longer-dated Treasurys to contain interest rate returns on the benchmark 10-year note. Lower yields have benefited Bitcoin throughout 2020, so it was safe to assume that the Fed’s extended assistance would aid the cryptocurrency’s bull run.
But with Mr. Powell choosing to remain mum, the Bitcoin market entered an uncertainty phase.
“Speculation is harder when there is no clear upwards trend,” said Alex Krüger, an independent market analyst. “There are multiple major market drivers pulling in opposite directions, and/or trades are crowded. As is the case right now.”
“I’ve got bids down to 45k,” said another analyst. “I still definitely lean towards the low being in — this drop doesn’t surprise me at all.”
Institutional Support for Bitcoin
Ki-Young Ju, the CEO of CryptoQuant—a South Korea-based blockchain analytics platform, said that institutional capital into the bitcoin market remains higher near the $46,000-47,000 range. As of Friday morning in London, about 12,000 BTC flowed out of Coinbase Pro wallets to enter its custodian addresses, reflecting accumulation via over-the-counter desks.
“Also,” Mr. Ju added, “it seems most US institutions haven’t sold any Bitcoin since their OTC deals. For example, custody wallets from Coinbase outflows on Dec 23, 2020 [show that] no BTC moved since then.”
Bitcoin was trading at $46,500 at press time.
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