Declining momentum resulted in a deeper correction for the cryptocurrency market on Thursday as the spot Bitcoin (BTC) ETF hype has all but faded, prompting traders who held out in the hopes of one final short-term rally to take profits and head to the sidelines until the market stabilizes.
Stocks bounced back from the losses recorded earlier in the week amid a flurry of quarterly earnings reports. The gains came despite comments from Atlanta Fed President Raphael Bostic that he doesn’t see the Federal Reserve cutting interest rates until the third quarter, which is six months later than the current market’s projection of a rate cut in March.
Bostic said the only thing that would change this outlook is “convincing” evidence that inflation is on the decline.
At the closing bell, the S&P, Dow, and Nasdaq were all in the green, up 0.88%, 0.54%, and 1.35%, respectively.
Data provided by TradingView shows that after holding above $42,500 through Thursday morning, Bitcoin experienced a sell-off in the afternoon that dropped the top crypto to a daily low of $40,600, with bulls now struggling to defend against further declines.
BTC/USD Chart by TradingView
Signs of a potential decline first appeared in the derivatives market, according to Kitco senior technical analyst Jim Wyckoff.
“January Bitcoin futures prices [were] again a bit weaker in early U.S. trading Thursday,” he said. “Bulls still have the firm overall near-term technical advantage but have faded a bit and need to show fresh power soon to keep alive a price uptrend on the daily bar chart.”
Bitcoin futures 1-day chart. Source: Kitco
“Bulls do not want to see BTC prices fall below the technical support line seen on the chart, which is just below the current price and which would at least temporarily negate the price uptrend,” Wyckoff warned.
Market analyst Rekt Capital noted that Bitcoin “bounced from the blue technical uptrend but offered a very limited rally” in early action on Thursday.
BTC/USD 1-day chart. Source: X
“Compared to previous rebounds from the higher low, this one has certainly been the weakest,” he said. “As a result, we need to question whether this technical uptrend is weakening. A downside wick below the higher low followed by a daily close above it could rescue the situation. However, a daily candle close below the higher low would likely kickstart the breakdown process.”
Bitcoin will retrace deep enough to convince you that the Bull Market is over
And then it will resume its uptrend$BTC #BTC #Bitcoin— Rekt Capital (@rektcapital) January 18, 2024
MN Trading founder Michaël van de Poppe repeated his warning that a notable pullback was expected and thinks BTC will trade in a range between $38,000 and $48,000 for the foreseeable future.
#Bitcoin doesn't even provide a rally toward $46K.
A retest at the lower boundaries will likely occur, and the range is getting defined between $38-48K.
I've been mentioning this for a long time.
Be ready to buy the dip, as the sentiment will become negative. pic.twitter.com/clHHTdEVzA— Michaël van de Poppe (@CryptoMichNL) January 18, 2024
But the weakness won’t last forever, according to Matthew Sigel, head of digital assets research at VanEck, who sees Bitcoin potentially hitting a new all-time high by the end of the year.
“So this year looks like a solid year. We think Bitcoin will make an all-time high in Q4 after a contentious election,” Sigel said during an appearance on the Unchained podcast. “A record number of global citizens are voting in elections this year, more than nearly 50%. It’s an all-time high – 200 years of history with these elections comes a lot of opportunity for change, disruption and more kind of pro-Bitcoin policies.”
“Our view is that this bull cycle is very much ahead of us and that the November and December rally was as much about the weaker dollar as it was about those exchange-traded funds (ETFs) flows,” he added.
Altcoins take a beating
The weakness for Bitcoin plunged altcoins deep into the red, with only six tokens in the top 200 managing to record a gain on Thursday.
Daily cryptocurrency market performance. Source: Coin360
Ribbon Finance (RBN) led the outliers, posting a gain of 11% to trade at $0.46, while Gas (GAS) climbed 10.95%, and Flare (FLR) increased 8.62%. Xai (XAI) led the losers with a decline of 17%, followed by a loss of 16.88% for Jito (JTO), and a 15.54% decline for Sei (SEI).
The overall cryptocurrency market cap now stands at $1.61 trillion, and Bitcoin’s dominance rate is 49.6%.
