Bitcoin, stuck in a range around US$30 000 lately, has some market watchers wondering if it’s vulnerable to further drops.
The largest cryptocurrency climbed for a third day, jumping as much as 3.7%, but it’s been stuck around $30 000 for several weeks now. What’s more, its record-high correlation with the Nasdaq 100 — illustrating its behaviour like a risk asset — has tailed off as tech stocks rallied in the past week.
“This is the type of de-correlation nobody wanted,” said Antoni Trenchev, co-founder and managing partner of crypto lender Nexo. “Bitcoin has yet to test its sub-$26 000 12 May lows. One senses it’s only a matter of time, given bitcoin’s failure to mirror the Nasdaq’s gains in the past week.”
Bitcoin has been stymied in recent months as the US Federal Reserve and other central banks have pivoted towards rate-hiking cycles amid stubbornly high inflation. The collapse of the Terra ecosystem has also hurt sentiment in digital assets.
Bitcoin is holding up relatively well compared to some of its peers, including second-ranked ether, but some technical analysis is still flagging concerns.
Bitcoin’s sideways churn over the last two weeks inside of a so-called “pennant” ended with prices breaking lower late last week. Bears will continue to have the upper hand unless the token reclaims $30 200, according to the pattern — and any break below $28 000 could see $25 000 coming back in focus. A descending-triangle pattern indicates that anything below about $25 400 could put the 2017 peak — just below $20 000 — into play.
“One final pullback to test 12 May lows near $25 401 still looks more likely before any meaningful low is in place,” Mark Newton, head of technical strategy at Fundstrat, wrote in a note on Thursday. — (c) 2022 Bloomberg LP
