After its best week in three months, Bitcoin is giving up some of its gains, with strategists pointing to a drop below a key trend line that often heralds further weakness.
Bitcoin has faded from the recent highs it hit last week, falling roughly 7% since Friday. The decline has pushed it back below $ 40,000 and the coin is now trading within its January range, at $ 37,914 at 2:29 PM ET.
“This rally has been so fast that you have to be a little careful how quickly it has accelerated over the past few weeks,” JJ Kinahan, TD Ameritrade's chief market strategist, said in an interview.
Bitcoin has also fallen below its 100-day moving average, a medium-term trend line followed by analysts, and could see further weakness to its 50-day moving average support around $ 34,773.
Some strategists claim that Bitcoin's decline is nothing more than a regular pullback after it rallied strongly early last week. Supportive comments from billionaire Elon Musk and Cathie Wood of Ark Investment Management LLC, as well as speculation about Amazon.com Inc.'s possible involvement in the cryptocurrency sector, have contributed to its recovery.
“If it does rebound, it's going to be pretty bullish,” said Matt Maley, chief market strategist at Miller Tabak + Co. “However, if you see a lot more downside tracking, things are going to get scary pretty quickly.”
The main Bloomberg Galaxy Crypto index, which tracks some of the cryptocurrencies, had lost as much as 4.3% on Tuesday.
Cryptocurrencies have also become a focus of attention for regulators in recent days: a new push from Congress to require cryptocurrency brokers to report transactions to the Internal Revenue Service could lead to some unwanted, reported tax payments. Bloomberg News this week.
The New Rules -which are part of the bipartisan package of infrastructures of US $ 550,000 million that Congress is studying- would also force the Companies to disclose the Operations with Digital Assets of More than US $ 10,000. All this to raise US $ 28,000 million. Still, fans of digital assets applauded the move, saying clearer rules from policy makers could strengthen the sector in the long run.
For his part, the chairman of the United States Securities and Exchange Commission, Gary Gensler, pointed out a pathway for the approval of a bitcoin exchange-traded fund, a move that crypto fans say could make assets more acceptable to mainstream investors.
The president said that an ETF that meets the SEC's strict rules for mutual funds could provide investors with the necessary protections. In his first major cryptocurrency speech, Gensler also said an opening to an ETF focused exclusively on bitcoin futures.
While bitcoin is extremely volatile and its percentage moves are exaggerated, it often forms identifiable technical patterns, said Frank Cappelleri, a trading desk strategist at Instinet. The currency's huge bullish move from 2020 to April 2021 was born out of a multi-month bottom formation, and thereafter, bitcoin broke, consolidated, formed new bullish patterns, and hit new highs until momentum finally died down. dissipated.
“When the next bull stretch begins, a similar chain of events is likely to happen again,” he said. And while the recent breakout attempt through $ 40,000 did not encourage a bullish follow-through, the consolidation since May has created a possible bottom formation. That scenario will remain a possibility if bitcoin can record a higher low compared to its July low. “
