- Bitcoin value could be jeopardized by strict government regulations
- Institutional demand for Bitcoin flattened
- Stellar is approaching major support zone
Last week started on a positive note with Bitcoin reaching its all-time high of 58 290 USD on February 22th. However, then the cryptocurrency market took a breath and downward correction appeared. It was caused by the negative sentiment prevailing in traditional financial markets as concerns regarding inflation and rising bond yields has spread to digital assets as well. It is not the first time when the cryptocurrency market followed the stock market, with last March immediately coming to mind. The capitalization of all digital assets in circulation decreased to 1.46 trillion, while an average daily trading volume is registered at $137.9 billion. Bitcoin's market dominance decreased to 60.7%.
Greatest bitcoin sale-off in a year
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Create account Try a demo Download mobile app Download mobile appBitcoin has fallen sharply amid the wider sell-off in risk assets. The most popular digital asset plunged by more than 25% last week, marking the largest drop since March. This weakness raised questions about Bitcoin's role as a hedge against inflation, which has been a key reason to buy cryptocurrency over the past year. Meanwhile according to the BCA Research Inc report, governments are likely to tighten regulations for the pioneer cryptocurrency, a move that could negatively impact Bitcoin's future value. Recently Treasury Secretary Janet Yellen claimed that BTC was an “extremely inefficient way of conducting transactions.”
The research firm reckons that Bitcoin is already disadvantaged due to the high cost and slow transaction, making it "unsuitable as a medium of exchange." Besides, it may lose the backing of environmentally focused, social, and governance funds because of its high energy consumption during mining. BCA Research believes that governments will bring up obstacles due to "the difference between the face value of money and the cost to produce it." Meanwhile institutional investor demand for bitcoin appears to have declined as prices rose. Grayscale has slowed accumulating bitcoins for the time being.
It seems that Grayscale did not used the recent sell-off to buy more bitcoin. Source: Bybt.com
OTC volume has also flattened since the beginning of the year, when compared to the sharp increases in volume which occurred during spring and summer of 2020. Despite the fact that spot demand has decreased, some analysts believe large institutions switched to use of derivatives with leverage to trade Bitcoin.
OTC volume is decreasing compared to last year. Source: Glassnode
Bitcoin - sellers failed to break below the major support at $42,500 and buyers regained control. Price managed to break out from the falling wedge pattern during today's session which signals that bulls have short-term advantage. However as long as the price sits below major resistance at $50,000 the continuation of a downward trend looks more probable. Only breaking above this level could lead to another upward impulse towards all-time high at $58,290.Source: xStation5Stellar at critical support area
Stellar price is trying to stabilize after sharp sell-off from $0.60 level. Looking at the 4H chart from a technical point of view, the coin is approaching the lower limit of the triangle pattern which is additionally strengthened by 200 SMA ( red line). Trend reversal is expected to come into the picture should a breakout below the lower trendline occur. In this scenario, the nearest support to watch lies at $ 0.3074. Only breaking above the upper limit of the formation will invalidate the bearish scenario and upward move may accelerate towards resistance at $0.5329 or even 0.6050 handle where February highs are located.
Stellar, H4 interval. Source: xStation5
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