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All is Not Lost as Bitcoin Hits Highest Level in Two Weeks

Purpose Bitcoin ETF

  • Traders betting on Bitcoin having bottomed out sent the cryptocurrency clearing US$39,000 momentarily before retracing on the news of Meta’s poor results 
  • Bitcoin may still have some upside to run, but is likely to trade range bound between US$32,000 to US$39,000 for the next few weeks short of any major catalysts to take it in either direction 


Unless you’ve been in the cryptocurrency space for a long time, these past few months would be gut-wrenching.

With Bitcoin now over 45% off its all-time-high, some investors are naturally concerned whether the benchmark cryptocurrency has bottomed out or if there is more pain left for bulls.

Some traders are however taking a bet that the Bitcoin has bottomed out, with the cryptocurrency peeking above US$39,000 for the first time in two weeks before retracing.

Not to be outdone, Ether also staged a reversal, rising over US$2,800 before dropping back again.

While expectations of tighter monetary policy by the U.S. Federal Reserve was the purported catalyst for the most recent correction in cryptocurrencies, softer language from policymakers on the extent of that tightening may have tempted some traders back into the crypto waters.

Over the past week, Bitcoin has also traded sideways, with unusually low levels of volatility.

Given that the psychologically important US$30,000 level had never been tested in a meaningful manner, traders are now looking to see if levels of resistance such as US$40,000 can be retaken.

In recent months, Bitcoin has also demonstrated the strongest correlation with U.S. stocks than at any point in the past, with correlations with the tech-heavy Nasdaq 100, rising to as high as 0.66 (1.0 being a perfect correlation) at one point.

Short of any major catalysts, however, Bitcoin is likely to continue to trade rangebound for the next several weeks – between US$32,000 and US$39,000.

Bitcoin, which has traditionally exhibited little correlation with other asset classes, has in recent times demonstrated a greater level of sensitivity to macroeconomic factors.

Against a backdrop of concern over tighter monetary policy, investors were risk-off, a move which saw a sharp decline across all risk assets, with the S&P 500 suffering its worst January since the 2008 Financial Crisis.

There are plenty of other factors for investors to be concerned about as well, including geopolitical tensions between Russia and Ukraine, with the U.S. recently authorizing another 3,000 troops to be deployed to bolster Eastern European allies, and a slowing Chinese economy.

The pandemic has also not fully abated, and recent job numbers out of the U.S. look likely to have suffered as a result of the Omicron variant in the last quarter of 2021.

These mixed economic signals against a backdrop of robust corporate earnings are making for an environment susceptible to multiple competing narratives and depending on one’s perspective of the role that Bitcoin plays within a portfolio, could either bolster or undermine taking bullish positions in the cryptocurrency.   



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