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Bitcoin prices have collapsed this year due to a major sell-off in risk-sensitive assets.
Dreamstime
Bitcoin
and other cryptocurrencies bounced back on Tuesday after trading around their lowest levels in more than a month over the weekend. But prices remain depressed, and traders view Bitcoin at a key level as a buying opportunity.
The price of Bitcoin rose 3% in the past 24 hours to above $20,400 as the biggest digital asset rallied from Monday’s low of $19,550 – its lowest level since mid-July. Before a broad sell-off on Friday started by a speech by Federal Reserve Chairman Jerome Powell, Bitcoin was trading near $22,000.
“Macroeconomic uncertainties continued to weigh on the price of Bitcoin,” said Joe DiPasquale, CEO of crypto fund manager BitBull. “We will watch for market reactions to new lows and aim to accumulate Bitcoin between $20,000 and $15,000.”
Cryptos plunged in recent days in line with stocks, after the worst session for
Dow Jones Industrial Average
and
S&P 500
in the months following Powell’s speech at the economic summit in Jackson Hole. The governor’s message was that the Fed would not budge on its goal of taming inflation with higher interest rates, despite the risk of recession.
An environment of rising rates and a possible economic downturn spells bad news for Bitcoin and other risky bets — such as tech stocks, with which crypto is heavily correlated. Higher interest rates push bond yields higher, making the relative returns of risky assets like Bitcoin less attractive, and a recession would be expected to further reduce demand for these assets.
Now, as head of Galaxy Research Alex Thorn pointed out in a note Monday, Bitcoin is trading below both its 200-week moving average and realized price, which is the average cost basis among crypto holders.
“While macroeconomic factors and monetary tightening may cause Bitcoin to trade lower in the near term, for several reasons both technical and fundamental these levels should be considered opportunistic buying opportunities for both medium- and long-term Bitcoin investors,” Thorn said.
Bitcoin has traded below its 200-week moving average on only a handful of occasions, the analyst noted, including the 2015 bear market, the 2018/2019 bear market, the peak of Covid-19 fears in March 2020, and the period from June 2022 to August.
“In the past, times when Bitcoin/US Dollar is trading below its 200-week moving average have proven to be favorable buying opportunities over a variety of time periods,” Thorn said.
The head of Galaxy Research sees support for Bitcoin on the downside around $17,700, and again at the 300-week moving average around $17,250. Thorn’s upside target in the short to medium term is Bitcoin’s realized price above $21,650, the 60-day moving average of $22 000, and the cycle interval of $25,000.
Beyond Bitcoin,
Ether
— the second-largest crypto — gained 10% to near $1,600, after plunging more dramatically than its larger peer. Altcoins, or smaller tokens, were just as strong, too
Cardano
up 7% and
Solana
5% higher. Memecoins were also resilient, too
Dogecoin
rising 4% and
Shiba Inu
gets 6%.
Write to Jack Denton at [email protected]
