Digital assets are recording declines today. In addition to Bitcoin itself, which fell from near $44,000 to test the $40,000 level, the sell-off is also extending to the altcoin market. We are seeing weaker sentiment on indices today. Both European benchmarks and Wall Street contracts are losing slightly. U.S. dollar futures, USDIDX are gaining 0.12%. It seems that volatility in the crypto market may also increase this week on Wednesday, when the Fed will decide on interest rates (8pm).
- There was no news in the cryptocurrency market to justify such a deep correction. However, the declines took place just after Bitcoin closed its 8th consecutive upward weekly candle, and appear to be due to pressure to realize gains, following a powerful rally. Demand came to a head rather quickly and lifted the price of Bitcoin above $42,000. According to data from Coinglass, the dynamic decline liquidated about $270 million in long positions and $1.2 billion in open positions in the BTC options market, currently worth about $17.9 billion.
Bitcoin chart (H1, H4)
The largest of the cryptocurrencies is trading around 4% down today, although at its peak it was close to 8%. Looking at the MACD, such a dynamic correction can only be comparable to the declines of early September, when Bitcoin dived from $27,500 to around $24,000. If the upward structure were to be preserved, a further scenario seems to be a consolidation around $40,000.
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The bulls managed to stop Bitcoin's price decline at the SMA100 support level (black line), at $40,000. Historically this year, the SMA100 average has been an important determinant of momentum, and a bullish reaction around it seems positive at least in the short term. In addition, it took place at the psychologically significant level of $40,000.
According to Glassnode data, the SOPR index, which tracks average investor returns during Bitcoin's rally, has remained at very high levels for nearly 50 days, longer than the average duration of 17 days (the longest period since the ATH in November 2021). On the one hand, this meant that the vast majority of investors were taking profits and, on the other hand, there was an influx of demand absorbing supply for many weeks.
On-chain data shows that investors are depositing their Bitcoins into cryptocurrency exchanges at a record low rate. Currently, the levels are the lowest since July 2020. This means that investors are not particularly keen on selling off their Bitcoins, despite such a huge rally. Limited supply generally favors higher prices. Source: Glassnode
Glassnode analysts suggest that the rapid increase in the average value of BTC transfers to cryptocurrency exchanges is indicative of institutional activity, which 'inflates' the average of such transactions to now close to $30,000.
The year 2023 was a great one for Bitcoin, for many, representing the digital 'brother' of gold. The largest of the cryptocurrencies has managed to decisively outpace the rise of spot gold, this year.
Smaller cryptocurrencies, despite their recent big increases, on average in 2023 are still well below Bitcoin and the second largest cryptocurrency, Ethereum, this year.