Bitcoin holds above $29,000 as downside risks mount – Cryptocurrency News
July 28, 2023 12:29 pm
After a prolonged period of low volatility, Bitcoin experienced a strong pullback in the last couple of weeks. Having traded within the $30,000-$31,000 range for nearly a month, it dropped below the $29,000 mark for the first time since June 20 before recouping some losses. This latest retreat could be attributed to a wide range of factors such as the fading optimism regarding the spot-Bitcoin ETF applications or the ongoing risk of restrictive policy, while the US regulatory crackdown is still in play. Are crypto markets heading towards a broader downside correction?
Crypto 2023 rally wobbles
Cryptocurrencies are experiencing one of their quietest summers in history as short-term profit takers continue to battle with buyers. The lack of bullish catalysts continues to underscore the case of an overstretched rally, thus risk-seeking investors might have started to play some defence or have tilted towards stocks, where the AI-fuelled bull market resumes unhindered.
In the past, the outlook in crypto markets has shifted from neutral to cautiously bearish, with traders becoming more pessimistic that the SEC will give the green light to any application for ETFs that track the spot performance of Bitcoin. Meanwhile, the prolonged regulatory crackdown from US authorities is showing no signs of easing, which continues to undermine investor sentiment and drive institutional flows away from cryptocurrencies.
Macro backdrop infuses more pain
As idiosyncratic factors ebbed, attention turned to any macroeconomic developments that could move crypto prices in a week packed with central bank meetings. Even though the Fed and ECB acted more or less in line with market expectations, the BoJ surprised by taking a step towards monetary tightening through the relaxation of its yield curve control policy.
Of course, this move does not have the effect of a rate hike, but it signals that the BoJ is set to stop the perpetual liquidity injections through its bond-buying program, which have been a significant tailwind for risk-sensitive assets. Besides that, on Thursday, an upbeat US GDP print coupled with signs of inflation coming down faster than expected, reinforced the case of higher for longer for the Fed, inflicting damage to risky assets. Bitcoin and cryptos in general could be affected more than equities from the latter development as the strengthening dollar directly reduces their value.
Bitcoin at a ‘make or break’ point
Taking a technical look at BTCUSD, we can see that the consolidation period ended with the price drifting lower below the $30,000 psychological mark before the 50-day simple moving average (SMA) capped its downside. It is obvious that the future of Bitcoin lies on whether this crucial threshold will hold as a break below it could trigger a massive decline.
Should the price bounce off its 50-day SMA, the $30,000 psychological mark could prove to be the first barricade for buyers to claim. Jumping above that zone, the digital asset might then advance towards the April peak of $31,064.
On the flipside, bearish actions could send the price towards the recent support of $28,840, a violation of which might bring the upward sloping trendline that connects higher lows since March under examination.
After a prolonged period of low volatility, Bitcoin experienced a strong pullback in the last couple of weeks. Having traded within the $30,000-$31,000 range for nearly a month, it dropped below the $29,000 mark for the first time since June 20 before recouping some losses. This latest retreat could be attributed to a wide range of factors such as the fading optimism regarding the spot-Bitcoin ETF applications or the ongoing risk of restrictive policy, while the US regulatory crackdown is still in play. Are crypto markets heading towards a broader downside correction?
Crypto 2023 rally wobbles
Cryptocurrencies are experiencing one of their quietest summers in history as short-term profit takers continue to battle with buyers. The lack of bullish catalysts continues to underscore the case of an overstretched rally, thus risk-seeking investors might have started to play some defence or have tilted towards stocks, where the AI-fuelled bull market resumes unhindered.
In the past, the outlook in crypto markets has shifted from neutral to cautiously bearish, with traders becoming more pessimistic that the SEC will give the green light to any application for ETFs that track the spot performance of Bitcoin. Meanwhile, the prolonged regulatory crackdown from US authorities is showing no signs of easing, which continues to undermine investor sentiment and drive institutional flows away from cryptocurrencies.
Macro backdrop infuses more pain
As idiosyncratic factors ebbed, attention turned to any macroeconomic developments that could move crypto prices in a week packed with central bank meetings. Even though the Fed and ECB acted more or less in line with market expectations, the BoJ surprised by taking a step towards monetary tightening through the relaxation of its yield curve control policy.
Of course, this move does not have the effect of a rate hike, but it signals that the BoJ is set to stop the perpetual liquidity injections through its bond-buying program, which have been a significant tailwind for risk-sensitive assets. Besides that, on Thursday, an upbeat US GDP print coupled with signs of inflation coming down faster than expected, reinforced the case of higher for longer for the Fed, inflicting damage to risky assets. Bitcoin and cryptos in general could be affected more than equities from the latter development as the strengthening dollar directly reduces their value.
Bitcoin at a ‘make or break’ point
Taking a technical look at BTCUSD, we can see that the consolidation period ended with the price drifting lower below the $30,000 psychological mark before the 50-day simple moving average (SMA) capped its downside. It is obvious that the future of Bitcoin lies on whether this crucial threshold will hold as a break below it could trigger a massive decline.
Should the price bounce off its 50-day SMA, the $30,000 psychological mark could prove to be the first barricade for buyers to claim. Jumping above that zone, the digital asset might then advance towards the April peak of $31,064.
On the flipside, bearish actions could send the price towards the recent support of $28,840, a violation of which might bring the upward sloping trendline that connects higher lows since March under examination.
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