25. Februar 2024

Bitcoin falls towards $53,000, Wall Street gains diminish appeal

Bitcoin falls to $53,000, Wall Street gains diminish appeal – now what?

Bitcoin fell towards $53,000 on Tuesday as US stocks rallied – breaking its tradition of shadowing riskier assets even as bond yields and the US dollar fell.

The benchmark cryptocurrency fell 1.13 percent to $53,500 a token before London’s opening bell. Bitcoin futures on the Chicago Mercantile Exchange fell more than 4 percent to $53,475 at 0600 UTC. At its intraday low, bitcoin was by Bitcoin Up trading at 53,000.

„It’s a due trip into oversold territory,“ explained Scott Melker, an independent analyst associated with the Wolf Den newsletter, referring to Bitcoin’s Relative Strength Indicator (RSI), which had previously drawn attention to its technically overbought status.

Bitcoin and competing markets

At the same time, Bitcoin’s recent decline has largely coincided with renewed demand for the US dollar against the Turkish lira’s plunge on Monday. The cryptocurrency typically reacts inversely to greenback trends.

The US dollar index was firm in the previous session but rose 0.15 percent on Tuesday.

Bitcoin continued to lose appeal as investor focus shifted to Wall Street, with the tech-heavy Nasdaq Composite up 1.2 percent by the close in New York. The benchmark S&P 500 rose 0.7 per cent at the same time. Bitcoin used to trade in tandem with tech stocks.

Meanwhile, US Treasuries trimmed losses, sending the yield on the 10-year bond to 1.699 per cent after briefly trading above 1.75 per cent last week.

The global equity rally was halted on Tuesday, with Asian markets falling along with US and European futures on concerns over the US-China relationship and tighter coronavirus lockdowns in Germany. Gold plunged in tandem.

Are more downward corrections coming?

Fundamentals favour bitcoin bulls. The cryptocurrency expects a bounce as global central banks continue loose monetary policies to support their economies battered by the fallout from the coronavirus pandemic.

Last week, the Federal Reserve said it would keep its interest rates near zero while buying government and corporate bonds at a pace of $120 billion a month.

Meanwhile, Joe Biden’s $1.9 trillion stimulus package kept the US dollar under pressure as it is oversupplied. The US president also reportedly consulted with his top advisers on a $3 trillion government spending plan that risks pushing the country’s debt-to-GDP ratio further above 98 per cent.

At the same time, the European Central Bank stepped up the pace of its bond-buying programme to the highest level in more than three months. It bought €21.1 billion worth of bonds in the week ending March 17 – up from €14 billion the previous week – to counter the recent sell-off in eurozone debt markets.

Bitcoin (go to buy bitcoin at eToro guide) could do well against the loose monetary policy. Investors looking for higher yields are moving away from low-yield bond markets and inflation-stabilised fiat currencies and seeking safety in cryptocurrency.

BTC/USD is up about 1,500 percent amid a dovish global environment. Nonetheless, the pair could technically fall further while maintaining its overall bullish bias.

BTC/USD slipped below its 20-day exponential moving average on Monday, warning bulls of a possible extended sell-off towards its 50-day simple moving average, now around the $50,000 mark. At the same time, the pair’s decline appeared like a negative breakout move from a Rising Wedge, a bearish reversal pattern.

This posed the risk of BTC/USD falling to the maximum height of the wedge. The downside target is therefore near $41,000.