and other cryptocurrencies fell on Friday in what looked like a short-term correction after a red-hot rally in digital assets. Prices could fall further even as traders continue to be bullish on the outlook for cryptos in the months ahead.
The price of Bitcoin dropped 6% over the past 24 hours to below $68,000, with the largest crypto falling beneath $65,700 at its lowest—a decline of more than 9% from peak to trough in its daily range. It seems like a short-term correction from record levels. Bitcoin hit an all-time high near $74,000 earlier this week, after blowing through the November 2021 high around $69,000 in the week prior, amid a rally that has seen the market capitalization of digital assets rise to $2.6 trillion.
“Bitcoin looks very bullish even if it witnesses a much-delayed correction in the coming days,” said Rachel Lin, CEO of trading platform SynFutures. “With Bitcoin clearly in price discovery mode, we might see a strong uptrend in the coming weeks and months.”
Indeed, Bitcoin is still up by some two thirds this year and continues to be supported by several catalysts.
Among them is jubilation in the stock market and a wider improvement in risk sentiment, with the
and
remaining near record levels and buoying cryptos, which have long shown themselves to be correlated with equities. Traders are also bullish about Bitcoin’s so-called halving—a cut to the token’s programmed monetary policy that will see supply restricted next month, potentially boosting prices at a time when demand has been rising.
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But the biggest boost for Bitcoin has come from spot Bitcoin exchange-traded funds (ETFs), which were approved by the Securities and Exchange Commission in January and have ushered in a fresh wave of investor interest in cryptos. These funds have had billions of dollars of inflows, and since they hold Bitcoin itself—and not just derivatives tracking its price—their record-breaking popularity has had a significant impact on token prices.
“The surge in demand for Bitcoin as a result of these newly launched ETFs is profound, as evidenced by the huge amount of capital flowing into them on a daily basis,” said Markus Levin, co-founder of blockchain network XYO. “Of course we could see big pullbacks, but…I see this trend as continuing for the foreseeable future.”
Nevertheless, digital assets dropped steeply on Friday and prices could fall further because of how much froth has built up in crypto amid the bullish run in recent weeks. Traders have overwhelmingly piled into bullish leveraged bets on Bitcoin futures made with borrowed money—a dynamic that makes prices vulnerable to volatile swings if the market shifts against the positions held by most traders.
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“New historical highs are a trigger for selling. Some players are taking profits, which raises the question of whether there will be enough hot buyers at current levels or whether the majority will prefer to wait for a deeper correction,” said Alex Kuptsikevich, an analyst at broker FxPro.
“In a corrective scenario, the $65,000 to $65,500 and $60,000 to $60,500 areas are of particular interest, as they contain important round levels significant for retail [investors],” he added.
Beyond Bitcoin,
—the second-largest crypto by market value—dropped 5% to below $3,700. Smaller tokens or altcoins were even weaker, with
crumbling 8% and
plunging 8%. Memecoins were lower, with
and
shedding 11% each.
Write to Jack Denton at jack.denton@barrons.com