- Slipping to as low as US$38,200, the benchmark cryptocurrency has since rebounded to over US$40,000.
- The standout performer amongst cryptocurrencies has been Dogecoin, which has been helped by the prospect of its longtime backer Elon Musk’s move to purchase Twitter (+5.66%) for a whopping US$44 billion.
As overall risk-off sentiment grips investor psyches, Bitcoin joined a slew of other risk assets in a broad selloff against a backdrop of tighter central bank monetary policy and risks ranging from Russia’s invasion of Ukraine to a potential hard landing for China’s economy.
Slipping to as low as US$38,200, the benchmark cryptocurrency has since rebounded to over US$40,000.
Ether, the world’s second most valuable cryptocurrency by market cap, tracked a similar course, declining to below US$2,800 at one stage before rebounding to over US$3,000.
The standout performer amongst cryptocurrencies has been Dogecoin, which has been helped by the prospect of its longtime backer Elon Musk’s move to purchase Twitter for a whopping US$44 billion.
Last year, Musk shilled Dogecoin, which was always intended as a meme-coin to parody the cryptocurrency industry, sending the Dogecoin soaring some 14,000% by May 2021.
In January, Musk announced on Twitter that Dogecoin could be used to buy Tesla merchandise (not the vehicles).
Despite several technical indicators suggesting that Bitcoin could have further to fall, the cryptocurrency markets have seldom been beholden to chart patterns, with swift reversals a hallmark of the trading landscape.
Given that most Bitcoin is not traded anyway, the little that is remains stuck in a relatively tight trading range between US$35,000 to US$45,000 and of late has straddled an even more closely held band roughly around the US$40,000 mark.
Bitcoin has also had an extremely strong rolling 30-day correlation with the S&P 500, with a reading of 0.91 (1.0 representing two assets moving synchronously).
That sideways movement for Bitcoin has also dovetailed with an overall fall in trading volumes across cryptocurrency exchanges, which may not necessarily reflect that investors are no longer interested in the cryptocurrency, but may no longer be interested in “trading.”
A study of blockchain analytics data provided by Glassnode reveals that a massive amount of Bitcoin is coming off cryptocurrency exchanges and put into “cold wallets” which are not connected to the internet and are typically used by investors looking to hold Bitcoin for the long run.
Investors typically only bring Bitcoin to the exchange when they are looking to sell the cryptocurrency and blockchain flows can be reflective of sentiment – the more heads into exchanges, the higher the likelihood that investors are looking to sell and vice versa.
For Bitcoin bulls, the lack of trading volume could be a potential catalyst that sees prices surge significantly upwards as times in the past where more investors held Bitcoin for the long-term have coincided with sharp rallies in illiquid markets.