Bitcoin headed for its biggest monthly drop since the rout in May
Still it’s looking at a 65% climb year to date, way ahead of stocks and commodities
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Bitcoin edged higher after a steep decline in choppy year-end trading, but it’s still on course for its biggest monthly drop since the cryptocurrency rout in May.
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The volatile token was trading 0.6 per cent higher at 47,835.46 as of 10:21 a.m. Wednesday in London, following a near 7 per cent drop Tuesday. It’s retreated some 16 per cent this month, while the wider crypto universe has shed about US$260 billion of market value over the period, according to tracker CoinGecko.
Demand for the most speculative investments has waned as 2021 comes to a close, in part as the Federal Reserve pulls back on the exceptional stimulus that helped to lift a variety of assets this year. Some analysts say the pullback will be brief.
“I suspect year-end book squaring into thin market conditions exaggerated the range,” said Jeffrey Halley, a senior market analyst at OANDA. “There is nothing to suggest that Bitcoin’s recent US$45,000 to US$52,000 is under threat.”
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Strategists are keeping an eye on key technical levels to try to figure out clues about Bitcoin’s outlook.
Katie Stockton, founder and managing partner of Fairlead Strategies, an independent research firm focused on technical analysis, said Bitcoin’s next level of support is around US$44,200, based on a Fibonacci retracement.
The token’s wobble this month has pared its year-to-date climb to about 65 per cent, still ahead of traditional assets like global equities and commodities.
Crypto converts expect the Bitcoin bull market to return in time and point the digital asset back at the record high of almost US$69,000 hit last month. Among their arguments is the controversial idea that the token offers a hedge against inflation.
“The arc of history is long,” Graham Jenkin, chief executive officer of crypto exchange CoinList, said on Bloomberg Television. “Over time Bitcoin is going to be a pretty superior asset to invest in.”
It could be that a dip in trading volumes over the Christmas holiday period is exacerbating price moves.
“I’m going to go out on a limb though and classify this as low-volume holiday-season funk,” said Mati Greenspan, founder of market analysis, advisory and money management firm Quantum Economics, referring to recent performance.