Crypto newsletter: Bitcoin sell-off continues

• Bitcoin price fell over 50% from ATH
• Biden administration prepares executive order outlining cryptocurrency risks
• Cardano's first DEX SundaeSwap failed to impress on launch

Cryptocurrencies continued to move lower during today's session, with Bitcoin falling to below $33,600, over 50% from a record high of $69,000 in November. Investors are moving away from risky assets dumping cryptos assets and stocks from technology sector as major central banks are becoming more hawkish. Meanwhile tensions in the Eastern Europe are increasing and the Russian central bank draft proposal aiming to ban all cryptocurrency trading and mining also weighed on sentiment. Nevertheless, investors await a decision from FOMC (Wednesday, 7:00 pm GMT) and will look for clues as to whether the central bank will ease its latest hawkish rhetoric in the face of recent declines. Furthermore, according to rumours, Washington intends to announce its strategy for dealing with cryptocurrencies as early as February and will request that authorities begin assessing the benefits of the digital industry against its risks.

BITCOIN:

• Bitcoin broke the halving pattern. First halving took pace in November 2012 and sparked a rally that pushed price from $12 to $1,217 one year later. After the second halving event in July 2016 price  jumped from $647 to $19,800 by December 2017. However, the third halving event in May 2020  has so far failed to trigger similar price moves. 

 After the 3rd halving many investors expected that BTC price will jump to 100k within several months, however performance of the first cryptocurrency disappointed in recent months. Source: Ecoinometrics

• At the moment there were no signs of renewed buying by large investors (whales). Supply held by entities owning at least 1,000 BTC stagnant, having decoupled from rising prices in late September.

Despite recent downward moves, whales are not eager to enter the market and buy the dip. Source: Glassnode

• The cryptocurrency market came under impressive pressure in recent days, while total capitalization fell to 1.52 trillion. The Fear and Greed Index for the sector returned to the extreme fear territory, dropping to 10 on Sunday, lowest level since May 2021. In the past, this often heralded a price rebound.

The last time that the Crypto Fear and Greed Index flashed a reading of extreme fear, the digital asset market capitalization rebounded by 63%. Source: Alternative.me 

• On the other hand, fund flows from major institutions dried up recently. As long as this trend does not reverse, the downward movement may deepen.

Digital asset investment products saw outflows totalling US$73m, the 5th week of outflows with this run now totalling US$532m. Source: Coinshares

• Despite recent bearish price action there’s still some bullish sentiment surrounding Bitcoin mainly thanks  to ongoing institutional adoption from major financial players like PayPal and Visa, as well as the news that El Salvador had introduced the asset as legal tender. 

Bitcoin price attempted to recover on Sunday, however the upward impulse turned out to be short lived and declines resumed on Monday. If current sentiment prevails,  the next major support level can be found at $30 000 which is marked with previous price reactions. Source: xStation5

Ethereum:

• OpenSea and NFT issuers have transferred 56,300 Ether to exchanges and in royalties over the past two weeks which put additional pressure on the altcoin price. 

Some analysts believe that the rise in selling pressure due to OpenSea and NFT transactions fueled the drop in Ethereum price.  Source: Glassnode

Etherum, the second-largest cryptocurrency, fell below $2200 from an all-time high of $4800 hit in November. Currently price is testing support at $2090 which is marked with previous price reactions and 127.2% external Fibonacci retracement of the last upward wave. Source: xStation5

CARDANO:

• Cardano network's first decentralized application (dApp), SundaeSwap wal launched last week, causing a stir among users. Within the first two minutes of SundaeSwap's launch, users suffered failed transactions, congestion in the smart contract network and platform errors. The failed transactions could be caused by a sudden influx of users and a spike in activity, nevertheless these news negatively affect tokens price.

Cardano price broke below psychological support at $1.00 which coincides with the lower limit of the 1:1 structure. If current sentiment prevails, downward move may accelerate towards $0.97 which is marked with 112.8% external Fibonacci retracement of the last upward wave. Source: xStation5