Bitcoin’s important support level sits at $30,000 as bear-market plunge grips crypto sector
Bitcoin has recouped some losses after it slumped Monday to as low as $32,983, as investors expect the Federal Reserve’s meeting, which will be held on Tuesday and Wednesday, to set the tone for a shift away from its easy-monetary policy started during the pandemic.
The cryptocurrency (BTCUSD) is trading at around $36,344, about 47% lower from its all-time high of $68,991 in November, according to CoinDesk data.
The recent tumble marks the second-worst selloff since bitcoin’s bear cycle from 2018 to 2020, according to research firm Glassnode. The fall is only eclipsed by the 54% drawdown in July 2021 from the crypto’s April highs.
“There are more important macro factors and dynamics affecting crypto right now than ever before,” David D. Tawil, president and co-founder of crypto hedge fund ProChain Capital, told MarketWatch.
The selloff is a continuation of the global “risk-off” trade, said Ben McMillan, chief investment officer at crypto investment manager IDX Digital Assets. Bitcoin has been trading in tandem with stocks lately , though the former posts far greater volatility.
Crypto investors are also concerned about the White House’s coming moves on crypto regulation, as the Biden administration is poised to release an initial governmentwide strategy for digital assets as soon as next month, according to a Bloomberg report on Friday citing people familiar with the matter.HODL or sell?
The recent selloff is “driven disproportionately” by shorter-term holders, which refers to the wallets that owned bitcoin for six months or less, according to McMillan.
“A lot of new buyers came into the asset class relatively recently when it neared all-time highs,” and some of them were attracted by bitcoin futures ETFs, said McMillan.
Tawil echoed the point, saying that “if the bottom persists for a while, it could flush out entirely new and/or weak hands/investors, of all types; some, never to return. And those with staying power will become more influential and important to the sector than ever.”What’s next
David Duong, head of institutional research at crypto exchange Coinbase, wrote in Saturday notes that he believes that there is room for more downside in the very short term.
“The culmination of low liquidity, weak earnings, stretched valuations and Friday’s large option expiry likely led to forced systematic selling and triggered the Nasdaq’s convincing breach of the downside channel,” Duong wrote. It will act as a drag on crypto with the negative sentiment persistent early this week, according to Duong.
McMillan said he is seeing more buying pressure as bitcoin gets toward $30k. “$30k is an important support, however, and investors would want to see robust demand at that level before having any conviction of a sustained up move,” McMillan said.