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Bitcoin and Ethereum retrace lower as 2023 rally stalls – Cryptocurrency News
April 21, 2023 12:27 pmVideo
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Cryptocurrencies have posted significant gains in 2023, with Bitcoin and Ethereum storming to fresh multi-month highs above crucial psychological levels. However, crypto prices have been on the retreat for the past three days amid a broader risk-off sentiment in markets, while regulatory woes continue to hurt the sector. Is the 2023 rally over or are digital coins just experiencing a healthy pullback after an overextended advance?
Cryptos tumble without a clear catalyst
In the last couple of days, crypto prices have been moving lower in lockstep with equity markets amid increasing concerns over the global economy. Specifically, Bitcoin retreated below the crucial $30,000 level, while Ethereum dipped beneath the $2,000 psychological mark, which was captured after the successful completion of the Shanghai update. Additionally, this recent negativity is also reinforced by the fact that the famous Crypto Fear & Greed Index dropped to 50, its lowest level since March 13 and just shy of the negative zone.
Although there is no profound driving force behind those recent losses, there are some potential factors to consider. Firstly, there could be some profit-taking from crypto traders as Bitcoin’s return temporarily reached more than 80% since the beginning of the year. Moreover, the latest upbeat inflation print in the UK alongside the slight increase in US core CPI metric, increased fears of a renewed inflation wave that could keep interest rates elevated for longer.
In other news, some disappointing earnings from tech giants such as Netflix and Tesla sent stock indices lower, dragging crypto markets with them. Meanwhile, cryptos lost some of their safe haven status as investors restated their trust on the traditional financial system after an earnings apocalypse in the banking sector was avoided.
Developments
Bitcoin’s year-to-date uptrend after a devastating 2022 has reignited investor interest towards the sector despite the recurring systemic failures. This is evident by the fact that at least three firms are set to launch leveraged Bitcoin futures ETFs in the upcoming weeks. These financial products are not currently available in US markets, thus increasing adoption could also lead to a stricter regulatory framework.
Speaking about regulatory concerns, Coinbase, one of the largest crypto exchanges, secured a license to expand in Bermuda as regulators keep tightening their grip on its US operations. If the firm abandons the US market, US crypto investors might lose their confidence on the exchange, which could lead to another liquidity crunch as the global crypto market capitalisation might shrink substantially. This latest move from Coinbase brings back bad memories for crypto traders as FTX transferred its operations to the Bahamas just before it collapsed.
Key levels for Bitcoin
Bitcoin had been trending higher since the beginning of the year, peaking at a fresh 10-month high of $31,064 before experiencing a mild downside correction. On Friday, the decline has resumed and the price is battling with the $28,000 mark.
This latest weakness could be considered a typical pullback before the king of cryptos extends its 2023 uptrend. However, this narrative might get shuttered in the case that the price dips beneath its 50-day simple moving average (SMA), currently around the 26,770 handle.
If the decline falters and the price reverses upwards, the bulls could initially aim at the $29,187 before the 10-month peak of $31,064 gets tested.
Alternatively, should the retreat extend, the March support of $26,770, which coincides with the 50-day SMA, could act as the first line of defence. Failing to halt there, the price could decline towards the $25,250 hurdle.
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