Macro And Technical Headwinds are Mounting for Bitcoin

A weak start to 2022 and a host of impending macro and technical headwinds put cryptocurrencies in a difficult position in the weeks to come.

The most important of these, bitcoin, has failed to stay above the $ 50,000  since its collapse on December 4 and has lost 12% this year.

Far from being the inflation hedge or the uncorrelated alternative asset that it was sometimes presented as, bitcoin has suffered disproportionately, losing 40% since its peak in November, as the Federal Reserve and others major central banks have laid out their plans to hike rates and remove monetary stimulus.

“There is more correlation than some would like between the cryptocurrency industry and more traditional markets,” said Jack McDonald, managing director of Standard Custody, a company that manages digital asset custody solutions for institutional investors.

Justin D’Anethan, a Hong Kong-based cryptocurrency analyst, points out that the leverage ratio – which tracks open interest in cryptocurrency trading venues versus bitcoin reserves – has increased despite liquidation of bitcoin holdings , which could be a sign of the accumulation of short positions in the currency.

Investors have started to favor “puts” even in options, he noted.

On the CryptoQuant analysis platform, bitcoin’s trade leverage ratio fell to 0.22, down from 0.15 a month ago.

The bitcoin market capitalization has fallen to around $ 793 billion, according to cryptocurrency platform CoinGecko. It has lost around $ 93 billion since the start of the year.

The crypto data platform Coinglass’s bitcoin Fear & Greed index last week hit its lowest level since July 2021, when the price of bitcoin traded at $ 30,000. Bitcoin futures on the CME saw volumes register the largest monthly decline of 77.4% to $ 11 billion in December, researcher CryptoCompare said on Friday.

Analysts Dalvir Mandara and Bilal Hafeez of research firm Macro Hive pointed out that the outflows of cryptocurrency-traded funds and the reduced profitability of incoming bitcoins were reasons to be pessimistic.

Yet, amid a panorama of indicators, they pointed to the slowdown in the growth of open interest in bitcoin as suggesting hesitation among investors and a positive funding rate for perpetual futures as a sign that traders are always willing to pay, albeit small amounts, to hold their long bitcoins.

Even though cryptocurrency-related stocks have largely mirrored the fall in digital asset prices, a few stocks have managed to gain ground by announcing new companies and proposals.

Shares of the stock meme GameStop Corp jumped 7% on Friday on plans to launch a division to develop a market for NFTs and establish cryptocurrency partnerships.

Blockchain infrastructure company BTCS jumped more than 44% on January 5 after announcing it would offer bitcoin dividends, known as bividends, to its shareholders who choose to opt for the solution.

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Macro And Technical Headwinds are Mounting for Bitcoin - /10

Summary

A weak start to 2022 and a host of impending macro and technical headwinds put cryptocurrencies in a difficult position in the weeks to come.

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