Bitcoin hovered around the 30,000 mark for a second day, forcing the rest of the crypto market to balance declines and gains. Ethereum lost 1.2% in 24 hours but remains near 2,000. Top ten altcoins are mostly down, losing between 0.7% (DogeCoin) and 3.8% (Polkadot). Tron gains 1.7% but is little changed since the end of last week. The total crypto market cap, according to CoinMarketCap, fell 1.1% overnight to $1.29 trillion. Bitcoin’s dominance index remained unchanged at 44.3%.
The Cryptocurrency Fear and Greed Index rose 4 points to 12 on Wednesday and remains in “extreme fear.” The index’s recovery from the lows since 2019 is due to a drop in sales, but not a reversal of the market towards growth. Bitcoin stalled at the psychologically significant 30K level and also lost momentum of the rebound at the 76.4% Fibonacci line since the late March down move to last Thursday lows.
This is a typical shallow countertrend correction. Failure of the market to build offensive from current levels would raise the question that the final downtrend target would be the 161.8% area of this move near $11.3000. Such a setback would nullify any bullish momentum from October 2020. So far, this scenario looks exceptionally pessimistic and must converge the disappointment of crypto neophytes on a real collapse of the global economy and the stock market. Such a drop would leave the price of Bitcoin just 16% off its peak, which has happened several times in its history.
However, a significant drop below previous cyclical highs ($20,000) would be unusual, although Bitcoin has already been redeemed on similar drawdowns. A more cautious scenario would perhaps be a dip into the $20-23,000 area to close the gap at the end of 2020 or a return to 2017 highs. The realistic-optimistic scenario indicates the possibility of cautious buying by long-term investors from current levels.
However, this does not suggest another wave of explosive growth, as financial conditions and a return to the region in early 2021 are disappointing for investors buying cryptocurrencies to make a quick buck. In addition, inflation weaned the purchasing power of the dollar by 10% over this period. Some of the news that caught our eye include: According to CoinShares, institutional investors invested $274 million in crypto funds last week, a record year-to-date. After TerraUSD, another stablecoin – DEI – lost its peg to the US dollar. According to the Congressional Research Service (CRS), the stable coin market requires strict regulation. Due to the speculative nature of cryptocurrencies, investors need more protection or they could lose faith in the markets, SEC chief Gary Gensler said.
Portuguese authorities are considering introducing a tax on income from investments in digital assets. Dogecoin co-founder Billy Marcus called 95% of cryptoassets “garbage” and suggested that 70% of investors don’t even understand the fundamentals of the crypto market.
This article was written by Alex Kuptsikevich, Senior Market Analyst at FxPro.