Bitcoin incurs a weekly loss of 4% as investors go into selling spree
Bitcoin kicked off the week of March 22nd on a negative note as it seems like U.S. Federal Reserve Chairman Jerome Powell spoiled the bull's party.
Speaking at the Innovation Summit by the Bank of International Settlements (BIS), Powell said that BTC is a "speculative asset," with no backing, and more of a "substitute for gold rather than for the dollar." He emphasized that private offerings like the pioneer cryptocurrency have failed to supplement the national fiat currency.
Powell's remarks caused an immediate adverse reaction among investors. The spike in bearish momentum saw Bitcoin's price drop by more than 7.60%, going from a weekly open of $57,480 to a low of $52,956, according to the CEX.IO exchange rate.
Despite the sense of pessimism in the cryptocurrency market, Tesla's CEO Elon Musk came to the rescue. The business magnate announced on March 24th that Tesla's customers were able to make purchases using Bitcoin. Musk further stated that the BTC tokens received would not be converted to fiat since the firm runs its own Bitcoin nodes.
Thanks to the announcement, the flagship cryptocurrency recovered some of the losses incurred, rising to a high of $57,220. But it seems like some investors took advantage of the upward price action to exit their long positions in preparation for the $5.5 billion worth of Bitcoin options contracts set to expire on Friday, March 26th.
The increase in profit-taking was significant enough to push BTC's market value down by more than 12% towards a weekly low of $50,500 on March 25th.
Fidelity's subsidiary, FD Funds Management, helped disperse fears over the options contracts as the firm filed a Bitcoin ETF proposal with the U.S. Securities and Exchange Commission. Such a bold move captured investors' attention, who rushed to exchanges to get a piece of BTC.
The spike in demand allowed prices to rise by 9.50% to close the weekly trading session at a high of $54,900. Still, Bitcoin holders incurred a weekly loss of 4.00%.
Ethereum follows Bitcoin's steps, closing the week 89 points lower
Like Bitcoin, Ethereum had a rough start of the week. It seems like the Fed Chairman's comments also affected the price stability of this altcoin as its market value dropped by nearly 8% between Monday, March 22nd, and Wednesday, March 24th. ETH went from a weekly open of $1,785 to hit a low of $1,650, according to the CEX.IO exchange rate.
Hermez Network's announcement that it had launched into mainnet its layer 2 scaling solution seems to have helped contain ETH's bearish momentum.
The project promised to bring scalability and cheaper transactions to the Ethereum protocol, which was well received by the community who continues being crippled by exorbitant gas fees. The network will initially support five assets, including Ether, wrapped Bitcoin, Dai, Tether, and the Hermez token, helping ease the blockchain's congestion.
Even though Ethereum gained roughly $100 in market value after Hermez Network went live, the upward price action was short-lived. The second-largest cryptocurrency by market capitalization took another 11.20% nosedive to reach $1,548 on Wednesday, March 24th, marking the lowest price point of the week.
Ethereum was able to stabilize on Thursday, March 25th, as investors seem to have bought the dip. On-chain data shows that the number of addresses holding 10,000 to 100,000 ETH shot up by nearly 0.60%. Roughly six new Ethereum whales with $16 million to 160 million in ETH joined the network within such a short period.
The spike in buying pressure helped Ethereum's price recover, rising by more than 7% on Friday, March 26th, alone. The smart contracts giant was able to close the day at a high of $1,696, but investors incurred a weekly loss of 4.72%.
Another rough week ahead
The top two cryptocurrencies by market capitalization have closed two consecutive weeks in the red while their popularity drops significantly, according to Google Trends. Such a market reaction is only natural after the euphoria seen among market participants earlier this year. It seems like mid-sized whales continue to book profits from an on-chain perspective, adding fuel to the recent downward price action.
As Bitcoin and Ethereum make a series of lower highs and lower lows, a descending trendline emerges for both digital assets. Currently, BTC's most crucial area of resistance level sits at $56,700, and for ETH, it is hovering at $1,740. Only a daily candlestick close above these levels will signal the bull market's continuation; otherwise, investors should prepare for another negative week.
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