Bitcoin snapped a 12-day slide, taking a breather to bounce along with the rest of the cryptocurrency market after a record-breaking string of declines. Analysts cautioned the respite may be brief.
The world’s largest cryptocurrency climbed as much as 12% early on Sunday, recouping some of its losses from a steep drop Saturday that sent the token to as low as US$17 599. It stood at $19 500 as of 3.15pm in Johannesburg. Ether, which touched as low as $881 in the selloff, climbed 15% to $1 040, while alternative coins from Avalanche to Solana also enjoyed gains. Even with the bounce, bitcoin is down almost 40% this month and more than 70% from its all-time high reached in November.
“For those who like to buy low and sell high, I think most can agree that it’s the former now,” said Mati Greenspan, founder of Quantum Economics.
The crypto market is known for its wild swings — particularly on weekends, when moves can be magnified — and the whipsaw of the past two days provided the latest example. Still, the overall tone remains negative, with monetary tightening providing macro headwinds and crises within crypto raising concerns about widening distress.
Trading has been heavier than normal this weekend, with bitcoin volume approaching $40-billion in the past 24 hours as of about 3pm South African time, according to CoinGecko. Last Saturday and Sunday, volumes stood at $25.6-billion and $22.5-billion, respectively.
Bitcoin’s leg down on Saturday pushed the coin below $19 511, the high it hit during its last bull cycle in 2017, which it reached at the end of that year. Throughout its roughly 12-year trading history, bitcoin has never dropped below previous cycle peaks. The token also broke through a technical support level of $18 300, said Katie Stockton, managing partner and founder of Fairlead Strategies. Consecutive weekly losses below that level would increase the risk of falling toward the next support of $13 900, she added.
As for trading now, Stockton said a short-term, “counter-trend” technical signal “provides some hope that a rebound will unfold in the near term”. She cautioned against buying the dip, though, as “momentum is strongly negative”.
A toxic mix of bad news cycles and higher interest rates has hurt crypto. The US Federal Reserve raised its main interest rate on 15 June by three-quarters of a percentage point — the biggest increase since 1994 — and central bankers signalled they will keep hiking aggressively this year in the fight to tame inflation. Adding to the mood, crypto hedge fund Three Arrows Capital suffered large losses and said it was considering asset sales or a bailout, while another lender, Babel Finance, followed in Celsius’s footsteps on Friday.
The risk-off sentiment can be seen from the redemption pressure in Tether as the widely used stablecoin’s circulation has dropped by more than $15-billion since the May collapse of the Terra ecosystem, according to CoinGecko. Some $4.4-billion of those redemptions came in the last seven days. — Sidhartha Shukla and Tanzeel Akhtar, (c) 2022 Bloomberg LP