Crypto Analysis by FxPro

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Bitcoin was down 4.9% on Thursday, ending around $20.7K and trading near $20.8K at the start of the day on Friday. Ethereum lost 6.4% in the last 24 hours, returning to the 1100 area. Altcoins in the top 10 fell in price from 2.9% (BNB) to 8.8% (Polkadot). Total crypto market capitalisation, according to CoinMarketCap, sank 3.5% overnight to $903bn. Bitcoin’s dominance index fell 0.3 points to 44.0%.

The Cryptocurrency Fear and Greed Index was up 2 points to 9 by Friday. Although we did not see any new intraday lows, Bitcoin closed Thursday with a tenth consecutive day of declines. New lows in stock indices contributed mainly to this. Bitcoin could be uncharted territory in a few days when historical patterns stop working. The bearish focus remains on the circular $20,000 level, the former peak of 2017. At no time in past down cycles has BTC fallen below the high of the previous bull cycle.

Closing the week below $22.3K would also be unique, as it would be the first close below the 200-week average. Bitcoin has previously fallen below this curve more than once but quickly regained some ground, finding ample demand from long-term investors amid a deep and quick sell-off. The latest issue to attract investors’ attention has been the uncertainty surrounding Singapore-based cryptocurrency fund Three Arrows Capital (3AC).

The hedge fund could be the subject of a new scandal amid growing speculation about its possible bankruptcy. Commodity Futures Trading Commission (CFTC) Commissioner Christy Goldsmith Romero called on the US Congress to close the cryptocurrency regulation gap and compared the collapse in the crypto-asset market to the 2008 financial crisis.

 

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are bitcoin still FUN ?

 

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In a 37% drop, Bitcoin closed below its 200-week moving average for the first time. Not only did we not see a rebound in retail action over the weekend, but an intensified sell-off sent the exchange rate below 2017 peak levels at $19.6K. At one point on Saturday, the price was down to $17.6K, disproving the idea that you can't lose money owning Bitcoin for over four years.

Bitcoin last week posted its highest decline since March 2020 on the back of a continuing fall in stock indices and a higher-than-expected US Federal Reserve key rate hike. At the weekend, BTC broke through the previous market cycle high of $20,000, which has never happened before. Ethereum lost 20.5% in seven days. After bottoming at $900 on Saturday night, the second cryptocurrency has now settled near $1070.

An essential characteristic of the crypto market was that altcoins were sidelined. Except for BNB (-12% for the week), we note either flat movements (XRP, Doge) or strengthening (Solana, Polkadot).

 

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Bitcoin’s decline is oversold, but it’s too early to talk about a new rally

Bitcoin has rebounded 5% in the past 24 hours, trading at $20,800. Ethereum has recovered 6.4% to $1130 in the same time frame. Leading altcoins in the top 10 are adding from a modest 3.5% (XRP) to an impressive 15% (Solana). Total cryptocurrency market capitalisation, according to CoinMarketCap, rose 5% to $914bn. Tuesday, the cryptocurrency fear and greed index was unchanged at 9 points (“extreme fear”).

Bitcoin managed to hold above the $20,000 round level on Monday amid weak trading activity due to the US holidays and attracting enough speculative demand after dipping below the meaningful round level. This recovery removes some of the extreme oversold nature of the cryptocurrency.

Still, it will be too early to talk about a long-term reversal: all negative fundamentals remain. In our view, until sharp monetary policy tightening becomes the norm, financial market pressures can quickly negate bounces in cryptocurrencies. Even if we have seen a bottom, it could still be months before the next sustained rally.

Bitcoin’s return above $20,000 does not mean it has hit “the bottom”, warned renowned cryptocurrency critic and gold supporter Peter Schiff. Alex Kuptsikevich, a senior analyst from FxPro said bitcoin had chosen the most pessimistic scenario possible amid rising inflation and an impending recession.

According to him, “those who survive will get HODLer status”. El Salvador President Nayib Bukele urged the cryptocurrency community not to panic as the market falls. According to him, the decline is relatively standard, and market participants must be patient. JPMorgan Bank said that the rising share of stable coins in the total market capitalisation of the crypto market indicates its growth potential. Changpeng Zhao, chief executive of cryptocurrency exchange Binance, denied media reports that the platform bought more than 100,000 BTC on a falling market.

 

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Bitcoin rallied from $20.5K to $21.6K during the day on Tuesday but later reversed to decline and went back on Wednesday morning. Ether corrected deeply, losing 4.4% over the last 24 hours. The top ten altcoins showed mixed dynamics, ranging from a 6.5% decline (Solana) to a 3.6% gain (Dogecoin).

Total crypto market capitalisation, according to CoinMarketCap, declined 1.9% to $900bn. Bitcoin’s dominance index dropped 0.2 points to 43.5%. The Cryptocurrency Fear and Greed Index is up 2 points to 11 by Wednesday and remains in a state of “extreme fear”.

After a strong move down last week and a retreat from the extremes on Sunday, BTCUSD failed to gain ground with buyers and remained pegged at the round level of $20K.

Bitcoin’s recent drop below $20K triggered a new wave of deleveraging and liquidations that affected miners and long-term investors, Glassnode claims.

Ethereum co-founder Vitalik Buterin criticised the popular Stock-to-Flow model for predicting bitcoin exchange rates, saying it is wrong and only gives people unwarranted confidence in the predetermination of exchange rate movements.

Investors are buying bitcoin despite the market’s decline. According to CoinShares, crypto funds saw capital outflows of $39m last week, while there were inflows of $28m into BTC.

Investors have, in our view, false confidence in their strengths. It is commonly believed in the media that retail investors were the first to buy out the 2020 bottom and who managed to beat the funds in 2021 using the r/wallstreetbets forum.

But then the Fed and many other central banks, along with governments, were on the buyers’ side, conducting unprecedented policy easing and handing out monetary stimulus. Now they are doing the opposite: rolling back support programs and raising rates at the highest rate in decades.

Retail shoppers risk being caught swimming against the financial current, which is hardly a successful strategy. History suggests that enthusiasts risk running out of steam soon, being left with depreciating assets, and losing confidence for years that equity or cryptocurrency markets are a worthwhile place for their money.

 

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Bitcoin may be near the bottom but not yet ready to rise

The tug of war in Bitcoin near the psychologically important $20K continues. After losing 4.7% to $19.9K on Wednesday, the first cryptocurrency returned to $20.4K on Thursday morning. Ethereum is down 1.2% to $1085 in 24 hours, with the top 10 altcoins trending from a 2% drop (Tron) to a 3% rise (Solana).

Total crypto market capitalisation, according to CoinMarketCap, was unchanged overnight, remaining at $900bn. Bitcoin’s dominance index fell 0.4 points to 43.1%.]

By Thursday, the Cryptocurrency Fear and Greed Index stood at 11 points (“extreme fear”).

Ian Harnett, a co-founder of Absolute Strategy Research, has suggested that bitcoin will collapse to $13K this year, as it is characterised by a drop of 80% from the historic highs it reached.

Arcane Research noted that in 2013 and 2017, BTC fell 85% and 84%. If history repeats, bitcoin’s downside potential persists to the $10,350 mark.

However, we note that in previous bullish cycles, the strengthening of BTCUSD has been many times stronger. For example, in 2013, it was more than 90 times. In 2017, it was 20 times, while in a year-long growth cycle through the highs of 2021, we saw “only” a tenfold increase in price.

In our view, it is much more reliable to estimate that Bitcoin finds a long-term bottom near the highs of the previous 4-year cycle, where the first cryptocurrency has already rolled back. Even so, it may not be the best time to buy, as it may take considerable time before the crypto market digests the recent turmoil and enters a new phase of sustained demand from broad segments of investors, not just stressed asset hunters.

 

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Bitcoin’s performance points to a weak risk appetite

Bitcoin rose 2.9% in the past 24 hours to $20.9K. Ethereum added 5.5% to $1140, while the top 10 altcoins growth ranged from 1.1% (Doge) to 11.5% (XRP).

Total crypto market capitalisation, according to CoinMarketCap, rose 3.1% to $929bn over 24 hours. Bitcoin’s dominance index lost 0.2 points to 42.9%. The cryptocurrency fear and greed index remained at 11 points (“extreme fear”) for the third day.

Bitcoin rebounded from the previous day’s decline on Thursday amid rising US stock indices. The first cryptocurrency has not yet managed to advance above $21K. Markets must guess whether we see crypto market weakness compared to equities or whether BTC works as a leading indicator, indicating that the rebound in equities is false.

Senior analyst Alex Kuptsikevich called bitcoin a leading indicator of stock market sentiment. In his view, now is the time to buy stocks as bitcoin investors are still talking about buying it on the downside.

 

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Rotation from Bitcoin to altcoins?

Bitcoin gained 3.8% over the past week, ending around $21.4K, dropping slightly to $21.2K on Monday morning. Ethereum added 9.4%, while other top-ten altcoins gained between 4.6% (Cardano) and 19.3% (Dogecoin). The total capitalisation of the crypto market, according to CoinMarketCap, rose 8% over the week to $952bn. The Bitcoin Dominance Index slipped 0.9 points to 43.4% over the same period due to the outperforming recovery of altcoins.

The cryptocurrency fear and greed index went up to 12 points by Monday, from 9 a week earlier, but remained in the extreme fear zone.

Bitcoin has risen above 20K in the past week, although its recovery has been more subdued than the stock market. This performance of the first cryptocurrency may indicate that investors continue to sell off the first cryptocurrency on the rise, moving into altcoins.

In the coming days or weeks, the important thing will be the performance of the crypto market capitalisation without BTC. Temporarily dipping below 2018 highs near $500B, the Crypto cap ex-BTC is showing a solid rebound, much more active than BTCUSD. However, it remains to be seen how sustainable this bounce will be.

CNBC broadcaster and author of the famous Mad Money programme, Jim Cramer, believes that bitcoin will be able to partially recoup its June losses in the coming months. However, aggressive long-term growth is unlikely. According to him, the rebound before another fall will provide good opportunities to sell previously bought assets.

 

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Bitcoin’s protracted sideways slide

Bitcoin has lost 1.9% in the past 24 hours, trading near $20.8K on Tuesday morning. Ethereum lost 2.3% to $1190, while other leading altcoins fell from 1.4% (BNB) to 6.5% (Dogecoin).

Total cryptocurrency market capitalisation, according to CoinMarketCap, sank 1.8% overnight to $933bn. The cryptocurrency Fear and Greed Index was down 2 points to 10 by Tuesday and remains in “extreme fear” mode.

Bitcoin was down on Monday, echoing the behaviour of the US stock indices. However, the stock market, particularly the Nasdaq, showed a much sharper rebound last week.

The BTCUSD remains under its simple 200-week moving average. It needs a meaningful fundamental driver, which is not yet easy to find and overcome.

The inability to find a point for a quick recovery makes the current cycle like the previous two in 2014 and 2018, when the decline lasted a year, after which we saw about a year of sluggish momentum with a slight noticeable upward bias. If we do see a repeat of this pattern, the pressure on the first cryptocurrency and following it, the whole market could continue until the end of the year, and there is no point in rushing to buy right now in the hope of a V-shaped rebound.

 

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Bears prepare for a new attack on Bitcoin

Bitcoin was down 3.1% on Tuesday, ending the day around $20.3K, where it is consolidating on Wednesday morning. Ethereum has lost 3.1% in the past 24 hours, leading other altcoins down 1.9% (Cardano) to 6.9% (Shiba Inu).

Total cryptocurrency market capitalisation, according to CoinMarketCap, fell 2% overnight to $911bn. Bitcoin’s dominance index remained at 42.5%. The Cryptocurrency Fear and Greed Index was up 3 points to 13 by Wednesday and remains in a state of “extreme fear”.

Bitcoin declined on Tuesday following the US market, where the bears reigned the upper hand again, taking more than 3% from the Nasdaq index.

The local technical picture is rather worrying. The recent bounce might have been enough to consolidate the bearish forces before a new attack. Traders should be ready for the new test of lows at 18K before the end of this week if moods on financial markets don’t reverse.

According to Alex Kuptsikevich a senior analyst from FxPro, capital outflows from crypto funds last week amounted to the all-time high at $423 million, with almost all funds withdrawn coming from bitcoin-based products. The driver was the launch of ProShares’ first US bitcoin inverse ETF, which allowed investors to open short positions in the cryptocurrency.