Why Bitcoin Could Be Tested This Week

A slew of catalysts will test the resolve of bulls who have posted big gains this year after an extraordinary period for crypto prices. BitcoinBTCUSD +0.62% and other cryptocurrencies fell Monday.

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It has fallen 2% in price to $22,800 over the past 24 hours. With the help of improved risk sentiment among investors and optimism that the worst of a brutal "crypto winter" has ended, bitcoin is up almost 40% so far this year in 2023, reaching six-month highs above $24,000 in recent trading. Bitcoin remains around just a third of its late-2021 high but has now risen above the two-year lows seen around $15,500 at the end of the last year, which have now been seen in the bear market.

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A complex macro backdrop of inflationary pressures, rising interest rates, and looming recession risks continues to affect the crypto markets, which have kept pace with the Dow Jones Industrial Average and S&P 500. As investors react to these macro factors, crypto prices continue to move in the same direction as stocks. Cryptocurrencies have weathered the latest Federal Reserve decision and a wave of economic data over the past week. This week will be filled with remarks from Fed officials, which could swing sentiment amid shifting expectations over the future of interest rates.

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“Bitcoin has survived a week packed with important events and economic data while maintaining a price around $23,000, but the market may have exhausted reasons to buy the coin and may be subjected to profit-taking sell orders this week,” said Yuya Hasegawa, an analyst at Bitbank.

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As it turns out, after such a strong rally to start the year, some of the fuel behind a rise in Bitcoin prices may be waning after such a strong rally to start the year. Over the course of a few weeks, the price of bitcoins has steadily risen from $17,000 to $23,000 over the course of the past few months. Even though there are more catalysts for prices in the days ahead, it remains to be seen whether some traders may attempt to lock in gains after one of the best winning streaks for Bitcoin in years-and that could challenge the resolve of bulls to continue.

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In spite of this, there is data that suggests otherwise.

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In spite of the recent run-up in price, long-term holders are not yet ready to sell despite the recent run-up in price. According to Rachel Lin, the CEO of cryptocurrency derivatives platform Synfutures, the long-short ratio, as well as the lending rates, also indicate that the bulls are still in control despite the recent volatility in the market.

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There are indications that the jubilation which has been seen in Bitcoin may actually be spreading to other cryptocurrencies, called altcoins because the bullish sentiment is becoming more entrenched, and retail investors are being drawn back into the market.

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“Last week, altcoins outperformed Bitcoin for the first time in several weeks. The [Bitcoin Dominance Index] fell for the first time in several weeks, which shows that the broader crypto market is catching up to Bitcoin's initial rally and indicating that retail enthusiasm is returning to altcoins,” Lin said.

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Apart from Bitcoin, the second most valuable crypto EtherETHUSD +1.52% - which has been down 2% to $1,630 - also fell 2%. Cardano fell by 2% during the day, and PolygonMATICUSD +2.59% fell by 4% during the day. Smaller cryptos or altcoins also fell in value. It was also a weak day for memecoins, with DogecoinDOGEUSD +0.78% down 4%, and Shiba Inu SHIBUSD +0.49% falling 5%.