Bitcoin correction will spur buyer action
Crypto market participants expected Bitcoin and altcoins to correct after exceeding $30K, but in fact, profit-taking started after $40K. The 46% rise since the beginning of the year has created a huge demand for profit-taking by market participants with short-term targets.
The correction at the beginning of the week could be a repetition of the dynamics of the previous week: deep and quick profit-taking followed by strengthening. Right now we are witnessing the strengthening of purchases after the decline to $32.3K and the price spiked by $3K. The repeat of last week's dynamics opens up the possibility of a successful $50K test in the near future.
The Crypto Fear & Greed Index for Bitcoin and major cryptocurrencies have been in "extreme greed" mode for more than 2 months, and at the moment show only a slight decline of 4 points to the "90" mark. The RSI index, on the other hand, showed a fast decline from the overbought area, indicating a rapid cooling of the market after the growth. The correction this Monday, as well as a week earlier, is likely to boost FOMO among optimistic buyers.
The total capitalization of about $1 trillion has become a kind of psychological level of resistance for the crypto market, as the $20K has been for Bitcoin in the past. The market will likely hover around $1 trillion for some time but it is obvious that compared to the traditional market these are very small values, and there is an impressive potential for growth.
Altcoins, for the most part, are just approaching their all-time highs. As we get closer to the beginning of February, we may see Ethereum (ETH) rise in price as the coin awaits the launch of CME futures. The project's move to version 2.0 can also be seen as a supportive factor. Ethereum (ETH) has already flirted with a historical high, but so far has failed to take this level. Nevertheless, the correction at current levels is also considered quite moderate.
It is worth keeping a close eye on how bitcoin will close Monday. If the coin can offset half of the intraday losses, closing above $37K, the first cryptocurrency will once again prove its ability for a turbulent and prolonged rally.
Author
Alexander Kuptsikevich, a senior market analyst at FxPro, has been with the company since its foundation. From time to time, he gives commentaries on radio and television. He publishes in major economic and socio-political media.
