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Bitcoin may have just rallied, but crypto prices have all but collapsed in recent months.
DreamstimeBitcoin and other cryptocurrencies rose on Wednesday, helped along by the correlation between digital assets and tech stocks. But the crypto space remains under intense pressure, with the possibility looming of another leg downward in prices.
The price of Bitcoin rose 1% over the past 24 hours to $20,100, reclaiming the key $20,000 mark, which it fell through last week. The largest digital asset is trading at less than one-third its all-time high near $69,000, reached in November 2021, but has held above its $18,000 bottom that was hit during the trough of a selloff in mid-June.
“I can only surmise that the Nasdaq’s rally lifted Bitcoin as well so that’s the short-term correlation to watch now,” said Jeffrey Halley, an analyst at broker Oanda. “My line in the sand for Bitcoin remains $17,500.00, everything above that will be noise, failure should trigger another wave of margin stop outs.”
While they should theoretically trade independently of mainstream financial markets, Bitcoin and other cryptos have shown over the past year to be correlated to other risk-sensitive assets, like stocks—and especially tech stocks.
Tuesday was a good day for tech stocks, with the tech-heavy Nasdaq rallying 1.8% as the S&P 500 eked out a 0.2% gain and the Dow Jones Industrial Average slipped 0.4%. That will have helped crypto prices, at least in the short term.
Ether, the second-largest crypto, gained 1% to $1,150. The token underpinning the Ethereum blockchain network remains far below its all-time high last November near $4,900. Smaller tokens, called altcoins, also gained, with Solana up 5% and Cardano 1% higher. Memecoins—initially intended as internet jokes—also rose, with Dogecoin and Shiba Inu both about 3% into the green.
Despite the recent rise in prices above key levels, investors may want to hold out on ‘buying the dip’ or prematurely calling a bottom for Bitcoin.
“Long-term downside momentum is growing stronger [for Bitcoin], such that it could take months for newly long-term oversold conditions to make an impact,” said Katie Stockton, the managing partner of technical research group Fairlead Strategies.
Stockton has seen Bitcoin consolidate in the range between $18,300 and $19,500—with the possibility of a breakdown in prices leaving $13,900 as a key support level on the downside.
In the case of a tremendous rally—which seems unlikely in the short term, given the amount of pressure on crypto—Bitcoin is likely to hit resistance near the token’s 50-day moving average around $25,400, Stockton said.
Write to Jack Denton at [email protected]
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