Bitcoin prices remain up some 40% this year.
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Bitcoin
and other cryptocurrencies fell back Thursday, yet another sign of slowing momentum in the digital asset rally that has kicked off 2023. Cryptos look vulnerable to declining before a major catalyst next week—which could spark new volatility.
The price of Bitcoin has lost 2% over the past 24 hours to $22,700, around the bottom end of the trading range either side of $23,000 that has dominated for much of the past few weeks. The largest digital asset remains up some 40% this year, having marched higher from late-2022’s two-year lows to the highest levels since last summer.
“Bitcoin’s strong start to the year appears to be over for now,” said Edward Moya, an analyst at broker Oanda.
While Bitcoin and other risk-sensitive assets like stocks got off to a great start in 2023—with one of Bitcoin’s best winning streaks in years—cryptos have edged lower in recent days alongside the
Dow Jones Industrial Average
and
S&P 500.
Digital assets and equities became closely correlated last year amid a tough macro backdrop of high inflation, rising interest rates, and recession risks, with both asset classes rallying in January as investors became optimistic the worst was over.
That optimism has faded somewhat as traders continue to mull the Federal Reserve’s next move on interest rates, with officials from the central bank striking a more aggressive tone on monetary policy in remarks this week. Traders are now looking ahead to the release next week of key U.S. consumer inflation data, which is likely to be a major catalyst for cryptos and shift future rate expectations.
Don’t expect much from digital assets until then. In fact, after such a roaring rally to start the year—and amid signs that the gains may be largely built on sand with a weak technical and fundamental backdrop—some declines may be in order.
“After hitting some key technical resistance just above the $24,000 level, Bitcoin is entering consolidation modes until we see the next big move in bond yields,” said Oanda’s Moya. “Bond market volatility will be insane after the Valentine’s Day inflation report, which might mean Bitcoin could drift towards the $20,000 level if stocks get hammered over the next few sessions.”
Beyond Bitcoin,
Ether
—the second-largest crypto—dropped 2% to $1,630. Smaller cryptos or altcoins were more mixed, with
Cardano
down 3% but
Polygon
popping 4%. Memecoins were weaker, with
Dogecoin
down 4% and
Shiba Inu
shedding 5%.
Write to Jack Denton at jack.denton@barrons.com
Credit: marketwatch.com