and other cryptocurrencies were on pause Tuesday, hovering at consolidated levels as momentum behind this year’s big crypto rally peters out.
The price of Bitcoin has dipped 0.3% over the past 24 hours to $23,111. The largest digital asset has soared 40% since the start of the year, leaving two-year lows behind and trading at the highest levels since last summer—a trend many crypto traders are betting means the beginning of the end of a brutal bear market. But the momentum has largely faded in February, with Bitcoin failing to hold above the $24,000 level and consistently returning to around $23,000.
“Bitcoin has seen its counter-trend rally stall in response to short-term overbought conditions,” said Katie Stockton, managing partner at technical research group Fairlead Strategies. “We expect Bitcoin to pull back further in support of our short-term bearish bias, noting it has seen a notable loss of short-term upside momentum. Initial support is at the 200-day moving average, near $19,700.”
The recent rally in cryptos comes alongside similar action in the stock market, where the
and
have climbed this year as investor sentiment for risk-sensitive assets—like digital assets and equities—has improved. A correlation between the asset classes means that Bitcoin and its peers will be similarly responsive to macroeconomic catalysts around inflation, interest rates, and recession risks, with a spate of remarks from Federal Reserve officials lying ahead this week.
But there are other, technical, factors that support Bitcoin and reinforce the argument of a market looking beyond the “crypto winter,” as outlined by Matthew Sigel, the head of digital assets research at fund manager VanEck, in a recent note.
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These include the fact that Bitcoin has never fallen for two consecutive calendar years—and the asset saw one of its worst years on record in 2022—and that the current bear market has lasted more than 380 days, which is longer than average. November also saw “meaningful capitulation” from long-term holders—people who held Bitcoin for at least six months—Sigel noted, which is another sign that the trough of the bear market could be past. At the same time, the Bitcoin leverage ratio has fallen sharply, Sigel said, suggesting caution from market participants.
In addition, there are trends in the global money supply that are also a tailwind for Bitcoin, which is highly correlated to M2 money supply growth, Sigel said. M2 growth recently hit 0% on an annual basis for the first time, but the three-month rate of global money supply change now exceeds the 12-month change, which is “historically a very positive indicator for a Bitcoin bottom,” said Sigel. “Investors focusing only on the Fed may be missing the improving global liquidity.”
Beyond Bitcoin,
—the second-largest crypto—gained less than 1% to $1,650. Smaller cryptos or altcoins were mostly unchanged, with
less than 1% lower, though
gained 3%. Memecoins were slightly weaker, with
down 1% and
shedding near 4%.
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Write to Jack Denton at jack.denton@barrons.com
