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Bitcoin Drops 15% as Analysts Say Rally Overstretched

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Bitcoin Drops 15% as Analysts Say Rally Overstretched

Analysts are mixed on how low bitcoin might go if a bigger pullback is seen.

Bitcoin swiftly lost altitude early on Monday, dropping over 15% to below $50,000 before rebounding slightly. The downward price movement comes after bitcoin reached new record highs above $58,300 over the weekend.

The drop seemed to accelerate as U.S. Treasury Secretary Janet Yellen described bitcoin as “highly speculative asset” that is extremely inefficient for transactions. Speaking at a New York Times event, Yellen called the amount of energy consumed in processing those transactions is “staggering.”

The top cryptocurrency by market value rebounded to above $51,000 as of 14:30 UTC, representing a roughly 11% drop over 24 hours, according to CoinDesk 20 data.

The pullback could be extended further, as the recent rally looked overstretched, according to David Lifchitz, CIO for Paris-based quantitative trading firm ExoAlpha.

“A 15% correction could happen, taking some steam out of the hot market, before reaching new highs,” Lifchitz told CoinDesk. “The more upward parabolic and fast a move, the more fragile it is, so a pullback would be more than welcome.”

Indeed, bitcoin has seen a staggering price rally over the past four months, rising from $10,000 to nearly $60,000, with just one bull market correction in the second half of January.

The recent rise from $30,000 to $58,000 was even steeper, so a healthy cooling off of the market looks overdue – more so, as several technical analysis tools, including the widely tracked relative strength index (RSI), are signaling overstretched conditions with an above-70 reading.

“Technical indicators such as the RSI and Stochastics across numerous chart timeframes are indicating that the crypto asset is overbought, implying that we could soon see a retracement,” Simon Peters, an analyst at eToro, said in an email.

Peters also pointed to a bearish divergence on the technical chart, while warning of weakening upward momentum and potential for trend reversal that could see prices fall.

The MACD histogram, an indicator used to gauge trend strength and trend changes, has produced lower highs, contradicting higher highs on the price chart, confirming the bearish divergence.

Macro factors

Supporting the case for a price pullback are rising U.S. inflation-adjusted bond yields, as discussed last week.

The 30-year inflation-adjusted yield, or real yield, has turned positive for the first time since June 2020, and the 10-year real yield has risen to -0.80% from lows near -1.05% observed last month, according to data provided by the U.S. Treasury.

A continued rise in yields could push the U.S. dollar higher, putting selling pressure on equities and bitcoin. Stock markets are trading down at press time, with the S&P 500 futures nursing a 0.6% drop on the day.

How low might bitcoin go?

“The pullback can easily extend to the former resistance-turned-support near $42,000,” Joel Kruger, currency strategist at LMAX Digital, told CoinDesk. Markets typically shake out weak bulls with a drop to former hurdle-turned-support levels before extending bull runs.

Bitcoin turned lower from its then-record high of $41,962 on Jan. 8, establishing that level as crucial resistance and slipped to $30,000 in the following days. The newfound resistance was a scaled on Feb. 8 after electric maker Tesla announced its $1.5 billion bitcoin purchase.

Crypto analysts expect other corporates to emulate Tesla’s decision to buy bitcoin. However, they may look to invest on price pullbacks, according to Lifchitz.

“$50,000 looks like the first stop for a mild pullback, but a second leg down could take it down to $40,000, while the $30,000 zone looks like the ultimate bottom should things turn ugly in the short term,” Lifchitz said.

However, Patrick Heusser, head of trading at Swiss-based Crypto Finance AG, said $52,000 is major support, adding that a significant correction may remain elusive, as the derivatives market is no longer exhibiting excess bullishness.

Bitcoin’s average funding rate, or the cost of holding long positions in the perpetual futures listed on major exchanges, declined (normalized) below 0.08% early today, having peaked at multi-month highs above 0.12% last week, according to Glassnode data.

While analysts stand divided on possible magnitude of an impending correction, they expect the cryptocurrency to eventually go on to achieve new record highs above $60,000.

“We believe markets are displaying a healthy correction,” Dibb said. “Both BTC and ETH are still trading within an upward channel, and momentum is still skewed towards the bids.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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MicroStrategy Dumps Over $1 Billion on Bitcoin, Now Holds $4.78 Billion BTC

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MicroStrategy Dumps Over $1 Billion on Bitcoin, Now Holds $4.78 Billion BTC

MicroStrategy, a business intelligence firm, announced it has purchased another 19,452 Bitcoin worth $1.026 billion.

The company joined Square and other companies that bought the dip witnessed earlier this week after Elon Musk, Bill Gates and Janet Yellen commented on the fast-rising digital currency.

MicroStrategy now holds 90,531 Bitcoin worth $4.78 billion, more than Elon Musk’s Tesla acquisition of $1.5 billion.

Michael Saylor, the Chief Executive Officer (CEO), MicroStrategy continues to pursue a coin acquisition strategy now codified in the business intelligence company’s mission.

Square purchased 3,318 Bitcoin at an estimated $170 million value on Tuesday when the world’s most dominant cryptocurrency dipped to $45,000 before rebounding to the current level.

Bitcoin presently trading at $49.233.71 per coin as of the time of writing.

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Bitcoin Rebounds To $50,881 Per Coin on Wednesday

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Bitcoin Rebounds To $50,881 Per Coin on Wednesday

Following Elon Musk, Janet Yellen and Bill Gates’ comments that plunged the world’s new gold, Bitcoin, on Monday, the digital asset has rebounded from $48.321 per coin to $50,881.63 as of 10 am Nigerian time on Wednesday.

Bitcoin gained 5 percent in the last 24 hours due to the surge in transactions by investors after Square, a payments giant, announced it has added 3,318 Bitcoin valued at $170 million to its holding of the coin on Tuesday.

Investors carried out 288,011 transactions valued at $16.91 billion in the last 24 hours.

Bitcoin briefly rose to as high as $51,413.61 to pare losses and extend year-to-date returns to 72.29 percent.

The digital currency was trading at an all-time high of $58,332.36 per coin before Elon Musk, the then world’s richest man said the dominant cryptocurrency is “too high too fast”.

Also, Bill Gates, in a recent interview with Bloomberg, said he is not bullish on Bitcoin. The third richest man in the world and the founder of Microsoft said, bitcoin uses too much energy and can cause a lot of trouble for investors who may not have much money to spare like Elon Musk.

He said “Elon has tons of money and he’s very sophisticated, so I don’t worry that his Bitcoin will sort of randomly go up or down,” Gates said during the interview. “I do think people get bought into these manias, who may not have as much money to spare, so I’m not bullish on Bitcoin, and my general thought would be that, if you have less money than Elon, you should probably watch out.

Janet Yellen, the former Chair of Federal Reserve and the present Treasury Secretary of the United States has been vocal about the environmental impact of Bitcoin given the amount of power needed to mine digit tokens.

I don’t think that bitcoin is widely used as a transaction mechanism,” Yellen told the New York Times on Monday. “It’s an extremely inefficient way of conducting transactions and the amount of energy that’s consumed in processing those transactions is staggering.

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Elon Musk Net Worth Tumbles With Bitcoin Value

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Elon Musk Net Worth Tumbles With Bitcoin Value

The now second richest man in the world, Elon Musk, has experienced a decline in his total net worth following a comment he made that Bitcoin value is too high and too fast.

Elon Musk’s net worth plunged by $15.2 billion in the last 24 hours to N183 billion, according to the latest data from Bloomberg.

The former world’s richest man has grown his net worth by $13.6 billion in 2021 alone. This represents an over 61 percent decline from over $20 billion gain posted last week.

In early February, the value of Tesla and Bitcoin rose substantially immediately Tesla announced it invested $1.5 billion in Bitcoin.

Cryptocurrency-focused investors jumped on Tesla stocks because of its exposure to Bitcoin, these same investors have started dumping the company’s stocks following Musk’s comments.

Tesla stocks dropped by $66.80 or 8.55 percent to $714.50 per share.

While Bitcoin valued plunged by over 17 percent from $58,000 to $47,226.88 with market value declining from $1 trillion to $880.11 billion.

 

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