Bitcoin slips further, down 20% from March’s high

“Bitcoin looks to be breaking a pivotal minor two-month trend on Friday’s pullback that likely causes weakness down to test January lows,” Mark Newton, a technical strategist at Fundstrat, wrote in a research note Friday. He expects an initial pullback to $36,300, “but breaks of that level should lead to a full retest of $32,950 without too much trouble”.

For all its recent losses, bitcoin remains in the middle of a trading range that has held since the start of 2022 between about $35,000 to $45,000. The digital currency moves strongly in line with the tech-heavy Nasdaq 100, and is negatively correlated with the dollar. 

With the Fed expected to hike rates in 50-basis-point steps in coming months to combat inflation, some of the factors that fuelled cryptocurrencies’ stellar gains in the past couple of years are going into reverse.

“As it becomes more valuable to hold dollars, some investors may reallocate from bitcoin or gold to the dollar,” a team from Nydig wrote in a report Friday. “Like the negative correlation of bitcoin to the dollar, the negative correlation of bitcoin to real rates has only emerged in the last couple of years.”

Bitcoin will still be mainly driven by fundamental factors, such as user growth and network usage, but it’s important to understand the evolving macro relationships, they said.

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