Bitcoin prices fell on Wednesday, paring gains from the highest levels since early 2021.
Dreamstime
Bitcoin
and other cryptocurrencies fell Wednesday as investors appeared more averse to risk with key catalysts looming. Nevertheless, multiple factors suggest the technical market backdrop remains favorable to digital assets.
The price of
Bitcoin
has dropped 2% over the past 24 hours to $51,200, briefly dropping below $51,000 before rebounding. The largest digital asset had traded above $52,500 this week, a zone that marks the highest levels since early 2021. Bitcoin blew through the psychologically important $50,000 level last week in the latest leg of a crypto rally that has seen prices double over the past six months, though prices have struggled to consolidate at recent peaks.
“Bitcoin has managed to avoid a selloff without replicating the upward momentum observed in recent days,” said Alex Kuptsikevich, an analyst at broker FxPro.
The crypto rally largely has been driven by the anticipation and later approval of the first spot Bitcoin exchange-traded funds (ETFs) in the U.S. last month, which bulls hope will usher in a fresh wave of interest in digital assets. A looming tweak to Bitcoin’s programmatic monetary policy, known as the halving, also has helped, as the change will restrict token supply and provide support to prices.
Gains in the stock market are another tailwind for cryptos, which are sensitive to wider risk sentiment and have shown themselves to be correlated to the
Dow Jones Industrial Average
and
S&P 500.
Two key catalysts—for the stock market in particular, but also for wider sentiment—lie ahead on Wednesday with the release of minutes from the last Federal Reserve monetary policy meeting and earnings due from chip maker
Nvidia.
While tokens have slipped lower amid a hit to risk sentiment ahead of the Fed minutes and
Nvidia
results, technical market indicators as well as fundamental supports signaled by capital flows suggest a healthy backdrop for cryptos.
“There is a well-defined uptrend channel in place that leaves the path of least resistance higher,” said Tom Essaye, the founder of Sevens Report Research. “$57,691 is the next key resistance level to watch” for Bitcoin, Essaye noted, referencing a technical indicator that flashed this technical level and adding that “we expect to at least see some hesitation as prices move into the mid $50,000s.”
Moreover, there are signs that traders are increasingly rotating out of solely Bitcoin positions into Ether—the second-largest token—as well as even riskier altcoins, or smaller cryptos, according to analysts at crypto market intelligence firm Glassnode. When traders shift into altcoins, it is typically a sign of improving risk sentiment within the crypto market and a precursor to wider gains across digital assets.
“The market momentum following the new Bitcoin ETFs, and the anticipation of a bull market in digital assets is starting to create shifts in capital flows,” said the Glassnode analysts, noting “a growing appetite from investors to move capital further out on the risk curve.”
Beyond Bitcoin,
Ether
prices fell less than 1% and were holding above $2,900. Altcoins were weaker, with
Cardano
down 7% and
Polygon
slipping 4%. Memecoins fell, with
Dogecoin
and
Shiba Inu
each down 3%.
Write to Jack Denton at [email protected]
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