Bitcoin Regains $43.5K as ‘Fear’ Hits Sentiment, Though Some Remain Bullish
Bitcoin showed signs of recovery following Wednesday’s slide as hawkish comments from the U.S. Federal Reserve failed to temper investor fears about inflation in the coming months.
Bitcoin (BTC) broke below a recent uptrend, price charts show, failing to breach the $48,000 level this week. The asset could fall to as low as $42,000, where strong support seems to exist.
Bitcoin dipped below a weeks-long uptrend. (TradingView)
Minutes from the Fed’s March meeting, released Wednesday, showed the U.S. central bank planned to shrink its balance sheet by $95 billion each month, or upward of a trillion dollars over this financial year, as it seeks to combat inflation. Markets slid following the release, with bitcoin dropping below support at $45,000.
But global stocks and indices showed a nominal recovery on Thursday. Europe’s Stoxx 600 rose 0.46% and Germany’s DAX rose 0.43%, while futures of the U.S.’s S&P 500 rose 0.15%. The recovery carried over to crypto markets, which showed signs of stabilizing as bitcoin and ether bounced from Wednesday’s lows.
In a 24-hour period, however, most cryptocurrencies remained in the red. Dogecoin’s DOGE carried the biggest losses among majors as it fell 11%, followed by Cardano’s ADA at 8%. Data showed the crypto market lost some 5% overall, sliding to a $1.9 trillion capitalization from Tuesday’s $2.4 trillion mark at one point.
Meanwhile, the website Alternative.me’s Crypto Fear & Greed Index, which reflects investor sentiment, flashed a “fear” reading to reach its lowest value in over two weeks.
However, some analysts pointed to recent on-chain data and investor behavior suggesting overall sentiment around bitcoin purchases remained bullish.
“The number of bitcoins on exchanges has fallen to the lowest since August 2018,” said Alex Kuptsikevich, senior market analyst at FxPro, in an email to CoinDesk. “Investors have been withdrawing coins since the beginning of March, which is often taken as a signal to keep Bitcoin out of the market for a long time.”
“This reduction in active supply often pushes the price up,” Kuptsikevich added.
Johnny Lyu, CEO of crypto exchange KuCoin, stated such market activity was able to buoy bitcoin’s drop.
“Positive market sentiment and the bullish trend did not allow Bitcoin to drop significantly,” Lyu said in a Telegram message. “This indicates great levels of investor support and the likelihood of growth for the cryptocurrency market in the short term.”
“Bitcoin is now influenced by numerous factors, both macro and micro. Therefore, many crypto investors have taken a wait-and-see approach, which is evidenced by a decrease in purchase volumes and an increase in withdrawals to third-party wallets,” he added.
Some others said the drop was a necessary correction following weeks of an uptrend.
“The drop is at best tagged as a necessary correction as all fundamentals antagonize the drop on all metrics,” stated Dmitry Mishunin, founder of security and analytics company HashEx, in an email to CoinDesk.
“Bitcoin has continued to see a massive accumulation from both corporate buyers and whales,” Mishunin commented, pointing out business analytics firm MicroStrategy’s recent bitcoin purchase.
“Another fundamental that antagonizes the current selloff is the fact the U.S. Securities and Exchange Commission has approved the Teucrium ETF application,” he said.