Bitcoin‘s losses this month were extended in Monday trade as investors avoided risk assets amid a more hawkish outlook for Federal Reserve policy tightening.
The largest cryptocurrency fell as much as 3.3 percent to $38,223, the lowest since March 15, and down more than 20% from its high last month. Ether, the second-largest coin, fell as much as 4.8 percent to $2,799, a low not seen since March 18.
According to technical analysts, price charts indicate that further declines are likely. According to Katie Stockton, founder, and managing partner at Fairlead Strategies, Bitcoin has fallen below its Ichimoku cloud support on a weekly chart, with secondary support only coming in at around $27,200. She isn’t the only one who sees more negatives.
“Bitcoin appears to be breaking a pivotal minor two-month trend on Friday’s pullback, which will likely cause weakness down to test January lows,” Fundstrat’s Mark Newton wrote in a research note Friday. He anticipates a pullback to $36,300, “but breaks of that level should lead to a full retest of $32,950 without too much difficulty.”
For all its recent losses, Bitcoin remains in the middle of a trading range that has held since the start of the year, between around $35,000 to $45,000. The digital currency moves strongly in line with the tech-heavy Nasdaq 100 and is negatively correlated with the dollar.
With the Fed expected to raise rates in 50-basis-point increments in the coming months to combat inflation, some of the factors that fueled cryptocurrencies’ stellar gains in recent years are now in reverse.
“As holding dollars become more valuable, some investors may reallocate from Bitcoin or gold to the dollar,” a Nydig team wrote in a report Friday. “Like the negative correlation between Bitcoin and the dollar, the negative correlation between Bitcoin and real rates has only recently emerged.”
Bitcoin will continue to be primarily driven by fundamental factors such as user growth and network usage, but it is critical to understand the evolving macro relationships, according to the experts.
