What’s next for bitcoin after it posted its worst week of the year
by James · May 13, 2023
Investors have been largely unaffected by the calm and remain so even as signs of a short-term correction begin to emerge. The largest crypto asset by market cap lost 11.25% for the week, the worst since November, according to Coin Metrics. Bitcoin has struggled to get past the $30,000 level since hitting it just over a month ago – and has fallen several times since. Losses built on Friday, with bitcoin trading at lows not seen since March. Ether fell 10.84% for the week. Coin Metrics measures a week in crypto, which trades 24 hours a day, from 4:00 PM ET the exchange closes one Friday to the next. “Bitcoin’s price movements seem to correlate with different narratives,” said Michael Zhao, a research analyst at Grayscale Investments. “Bitcoin has switched between the narrative of a risk asset and the narrative of a flight to safety asset. Bitcoin’s recent volatility may be a response to the market still trying to figure out which narrative is more appropriate.” Crypto suffered from a wave of negative news this week, including: a wave of long liquidations, triggered by a false rumor that the US government was selling its bitcoin, an increase in Bitcoin transactions due to the current revival of “Bitcoin NFTs” and memecoins, which led to Binance briefly halting customer withdrawals, reports of major market makers reducing US crypto operations, and uncertainty surrounding the US debt ceiling and Federal Reserve policy. But investors have been expecting rockier times ahead, following the closure of the main fiat-to-crypto ramps in March during the banking crisis and with the ongoing regulatory efforts against crypto. Grayscale’s Matt Maximo called it “the aftermath of a strong start to the year.” Data from CryptoQuant also suggests that investors took profits this week, as much of the selling volume came from bitcoin holders who bought between November 2022 and January this year. “Despite the decline, bitcoin is still trading in a relatively tight range,” Zhao said. BTC.CM= 5D mountain Bitcoin (BTC) this week The last few days bitcoin has ended up flat. One analyst said this trend alone could weigh on investor sentiment. He also said that the bitcoin chart shows a head-and-shoulders pattern — three peaks with a higher high in the middle — that analysts use to identify a price reversal after a prolonged uptrend. “Overall, bitcoin appears to be on the verge of correction, with the next stop in sight being the psychological level of $26,000 or the February high of around $25,300,” said Yuya Hasegawa, crypto market analyst at Japanese crypto exchange Bitbank . He also noted that investors should monitor the yield on the 2-year Treasury, which has had an inverse relationship with bitcoin this year. Wolfe Research is more optimistic. “Bitcoin finds itself rolling below resistance as the backtest of support continues to play out,” Rob Ginsburg said in a note this week. “Much like we saw in March, we feel this is leading to a re-acceleration.” However, “for bitcoin to continue higher, it will have to defy a few narratives,” he added. “First, the average stock is going lower. … Can bitcoin diverge from stocks and, more specifically, can it diverge from technology, rolling over with semis, leading technology to the downside?” Bitcoin is still up 59% for the year, but down about 7% for the quarter so far, according to Coin Metrics.
