Crypto stumbles on the upswing
Market picture
The cryptocurrency market took a hit on Tuesday as strong US data brought speculation of tighter monetary policy back into play. As a result, crypto market capitalisation lost over 6.2% in 24 hours by the start of active trading in Europe on Wednesday. US President-elect Trump continues with his passages about Canada as the 51st state, buying Greenland, and regaining control over the Panama Canal, which increases the pull from risk assets, hurting Bitcoin, among others.
The market is still bullish, but temporarily, investors have become more cautious, preferring to lock in profits quickly.
Bitcoin has lost about 7%, coming close to $96,000. This is a desperate attempt to bring the price back below its 50-day moving average. Failure to consolidate above $102,000 had short-term speculators looking for a reason to sell, and they quickly found one. That said, the positivity of the data and Trump's outbursts are not news and do not drastically change expectations.
Ethereum erased all of its gains since the start of the year, pulling back to $3,360 during Tuesday's sell-off. The sharp decline has brought the price back deep under its 50-day moving average, raising concerns about the near-term outlook.
News background
Tech analyst Ali Martinez notes that Bitcoin's important support zone is in the $95,400 to $98,400 range, where 1.77 million addresses have purchased more than 1.53 million BTC.
Glassnode draws attention to the decline in the funding rate to neutral levels below 0.01%. This suggests cautious positioning as speculators show limited willingness to pay premiums for long positions.
Ex-BitMEX CEO Arthur Hayes expects the bull rally in the crypto market to end in mid-March, after which the market will firmly correct. In his opinion, dollar liquidity will begin to decline in March and will resume growth no earlier than the third quarter.
The head of the Czech Central Bank suggested considering the possibility of using Bitcoin as part of a strategy to diversify the bank's reserves. Still, it explained that there are no plans to acquire any cryptocurrency yet. In December, the country passed a law that exempts hodlers from capital gains tax when holding BTC for more than three years.
Pierre Poilievre, a Bitcoin supporter who has openly declared his support for BTC and blockchain technology, may become Canada's new prime minister.
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.
