Bitcoin fell 1.8% on Tuesday, ending the day around $37,700 and temporarily below a significant support line. This included a cryptocurrency selloff as stock indices developed gains. The demand for risk recovery likely revived interest in cryptos that turned green on Wednesday.
Locally, bitcoin manages to hold its footing on support, which has weathered the onslaught of sellers over the past four months. On the other hand, a sequence of lower and lower local peaks has been observed since the last days of March. The lines for these two trends reached their point of intersection with a potential high point later in the day.
More often than not, the result of such triangles is to break the support because if it drops below $38,000, we could see a growing wave of selloffs. A return to the uptrend will require confirmation with a decisive move above $40,000, the area of previous local lows. The market driver today will be the FOMC, whose decisions and comments could reverse or reinforce the multi-week trend of the dollar exiting and demand for risky assets reducing.
The cryptocurrency market is approaching the big event in a state of extreme fear, with the corresponding index dropping 6 points to 21 on Wednesday. Total crypto market capitalization, according to CoinMarketCap, fell 1.3% overnight to $1.72 trillion. According to Morgan Stanley, bitcoin’s dependence on the stock market undermines the cryptocurrency’s potential as a hedge against inflation risk. Meanwhile, the correlation between bitcoin and a protective asset such as gold has fallen to its lowest level since 2018.
Brian Armstrong, CEO of Coinbase, estimates that despite the volatile state of the crypto market since the start of 2022, the number of cryptocurrency users will grow 5x in the next 10-20 years and reach more than a billion people. The United States Securities and Exchange Commission (SEC) is creating a new unit to oversee the crypto market and expand its staff to combat digital fraud. Argentina’s largest banks, Banco Galicia and Brubank, have announced that their customers will soon be able to trade cryptocurrencies.
This article was written by Alex Kuptsikevich, Senior Market Analyst at FxPro.