Bitcoin

Bitcoin Drops 15% as Analysts Say Rally Overstretched

Published

3 years ago

February 22, 2021

Samed Olukoya

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.”

Up Next

Bitcoin Loses 17 Percent Following Elon Musk’s Comments

Don't Miss

Bitcoin Faces Price Turbulence as Market Liquidity Falls, Says JPMorgan

Samed Olukoya

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Comments

Bitcoin

Bitcoin (BTC) Holds Steady Above $70,900 as Grayscale Bitcoin Trust (GBTC) Outflows Increase

Published

6 days ago

April 12, 2024

Samed Olukoya

bitcoin to Nigerian Naira - Investors King

Bitcoin (BTC) maintains its stronghold above $70,900 despite increasing outflows from the Grayscale Bitcoin Trust (GBTC).

As reported by CheckonChain, a total of $124.9 million flowed out of GBTC recently, contrasting with modest inflows into other investment vehicles like Fidelity’s FBTC and Bitwise’s BITB.

This trend has prompted speculation within the market regarding its impact on Bitcoin’s price dynamics.

While some believe that continued outflows from GBTC may exert selling pressure on BTC, driving down prices, others adopt a more cautious approach.

They argue that such outflows are expected from GBTC, given its relatively higher fee structure compared to alternative investment options.

Traders, however, seem to be pricing in a degree of stability for Bitcoin in the coming weeks, with optimistic forecasts on platforms like Polymarket.

According to predictions, there’s a 60% chance that BTC will reach $75,000 by the end of April, while the likelihood of it hitting $80,000 stands at 32%.

Despite the varying sentiments among market participants, Bitcoin’s resilience above the $70,900 mark underscores its status as a cornerstone asset in the crypto space.

Investors continue to monitor developments closely, navigating through the complex interplay of factors influencing Bitcoin’s price trajectory.

Bitcoin

Bitcoin Tests $66,000 Amidst Volatility Forecast

Published

4 weeks ago

March 22, 2024

Samed Olukoya

As Bitcoin surged to a $66,000 price level during Asian trading hours, cryptocurrency markets brace for heightened volatility, with market observers predicting turbulent times ahead.

The cryptocurrency’s price volatility has been a subject of much discussion, particularly in light of recent events.

Semir Gabeljic, Director of Capital Formation at Pythagoras Investments, who highlighted the ongoing volatility cited a recent drawdown of 10% fueled by spot Bitcoin ETF outflows from GBTC, totaling approximately $300 million on March 20.

Gabeljic emphasized that such drawdowns typically occur in the lead-up to Bitcoin halving events, signaling a potential for increased volatility in the near future.

Meanwhile, the CoinDesk 20 (CD20), which tracks the world’s most liquid digital assets, experienced a minor dip of 0.5%.

However, amidst this overall market movement, CoinDesk’s Digitization Index (DTZ) saw a notable uptick, led by protocols like Ethereum Name Service (ENS), which rose by 2.7% during Asia trading hours.

Singapore-based trading firm QCP Capital noted the current consolidation in the market, with Bitcoin and Ethereum trading within a relatively tight range.

They suggested that the market might see a pause in activity over the weekend following the volatility leading up to the previous weekend’s Federal Open Market Committee (FOMC) meeting.

Also, QCP Capital highlighted the continued outflows from the Grayscale Bitcoin Trust (GBTC), expecting a fourth consecutive day of BTC spot exchange-traded fund net outflows.

The firm also pointed out a widening discount on Grayscale’s Ethereum Trust (ETHE) and the market’s diminishing expectations for the approval of a spot Ethereum ETF.

With Bitcoin’s test of $66,000 and ongoing market dynamics, cryptocurrency investors and analysts remain vigilant, anticipating further fluctuations in the days to come.

Bitcoin

Binance CEO Forecasts Bitcoin Surge Beyond $80,000 on Institutional Inflows

Published

1 month ago

March 18, 2024

Samed Olukoya

Binance Chief Executive Officer Richard Teng has set his sights on Bitcoin surging beyond the $80,000 price level on the back of rising institutional investments into crypto-backed exchange-traded funds (ETFs).

Speaking at an event in Bangkok on Sunday, Teng highlighted the significant impact of the launch of Bitcoin ETFs in the United States earlier this year.

He noted that this development has attracted a considerable influx of institutional investors, propelling fresh funds into the cryptocurrency market.

Teng expressed confidence in Bitcoin’s upward trajectory, emphasizing that “we’re just getting started.”

Initially estimating Bitcoin to reach around $80,000 by the end of the year, Teng now believes that the cryptocurrency’s price will surpass this milestone.

He attributed this bullish outlook to a combination of decreasing supply and sustained demand within the market.

However, he cautioned that the rally wouldn’t be without its fluctuations, suggesting that the market’s ups and downs would ultimately benefit its overall health.

Bitcoin has already surged by an impressive 56% this year, reaching a record high of nearly $73,798 last week.

Despite concerns among some investors about a potential bubble, Teng remains optimistic about Bitcoin’s future trajectory.

Teng’s forecast comes in the wake of his appointment as CEO of Binance, succeeding co-founder Changpeng Zhao in November following the company’s $4.3 billion settlement with US authorities.

With relentless inflows into US spot Bitcoin ETFs since their approval in January, Teng expects further institutional adoption in the near term, with more endowments and family offices anticipated to increase their allocations into Bitcoin ETFs.