Bitcoin targets $23,000; is correction in sight for 'cryptos'?
Calm reigns in the cryptocurrency market. Bitcoin (BTC) has dropped 0.75% in the last 24 hours, but remains close to $23,000, while Ethereum (ETH) has accumulated a rise of 0.47% in the last day and has comfortably surpassed $1,600, standing at levels not seen since November 2.
The rise of the 'cryptos' at the beginning of 2023 is remarkable, led by Bitcoin, which has revalued 37% after losing more than 60% of its value last year. The good economic readings on both sides of the Atlantic and the greater appetite for risk have boosted the price of digital assets, but some experts still point out that this rebound is not sustainable and warn of various dangers for the sector. One of them is the bankruptcy of crypto-lender Genesis, a subsidiary of conglomerate Digital Currency Group, a collapse that could add a lot of pressure to cryptocurrencies because of the consequences it could have for Grayscale Bitcoin Trust (GBTC), the world's largest Bitcoin fund.
"The market has risen, partially fueled the short squeeze. Bitcoin and several altcoins are overheated and due for a correction. We wouldn’t be surprised to see Bitcoin testing $20,000 in the coming days," warned Joe DiPasquale, CEO of cryptocurrency fund manager BitBull Capital.
Cryptocurrencies have correlated closely with equity markets in recent weeks, driven by the market's belief that inflation is slowing and that the Federal Reserve (Fed) will moderate rate hikes at its next meeting. Still, the division within the US central bank is clear, with members such as Waller and Harker advocating a more dovish stance and others such as Brainard, Daly, George and Kashkari advocating the opposite. Other leading personalities such as Jamie Dimon, CEO of JP Morgan, foresee a tougher Fed than the consensus expects.
"The main focus is the relationship between the Bitcoin price and the equity markets. Bitcoin has a strong positive correlation with the risk-on factors, and it has been moving higher as the equity markets scored more gains. The big question is if it continues to trade higher as cracks have started to show in the risk-on rally," stated Naeem Aslam, chief market analyst at AvaTrade. According to the expert, it is "possible" that traders may back away from supporting riskier assets this week, and the comments from the Fed officials have indicated that the Fed doesn't seem to be in a rush to end its ultra-hawkish monetary policy.
"In terms of the price level, traders are focused on two price levels. Firstly, the resistance of 25K. Followed by that is the resistance of 30K. Secondly, the support is at a 20K price level. If we see the price breaking above their price points, only then are we likely to see another trend forming," he added.
Javier Molina, senior market analyst at eToro, highlighted that, from a technical point of view, "BTC is facing the first key resistances" and he called for "caution." "The $25,400 at the high end is very important. Below, $24,300 marks another area to beat. If we look at the supports, first we have $22,000 and then $18,200 as the level that should not be lost in any case," he explained, while warning of the "bearish divergences seen after entering the overbought zone."
It should also be noted that Signature Bank will not handle cryptocurrency transactions below $100,000 as it seeks to reduce its exposure to these assets. According to 'Bloomberg', almost a quarter of the $103 billion in deposits that the New York-based bank had last September came from the crypto sector. In December, Signature's CEO stated the bank would reduce its cryptocurrency-linked deposits by between $8 billion and $10 billion.
In other market news, Ripple (XRP) led the gains with a significant 6% rally. The rises in Dogecoin (DOGE), which has risen more than 4.5%, and the falls in Solanna (SOL), that have dropped just over 2% are also noteworthy.