In August 2022, bitcoin’s price bounced above $25,000, a level that capped the price rise.
At a price level that proved difficult to crack last year, Bitcoin’s (BTC) upswing has come to an abrupt halt.
As a result of a strong bid at the start of the year, the cryptocurrency has gained nearly 50% since, outperforming major traditional risk assets. Since Feb. 16, the cryptocurrency has failed multiple times to gain a foothold above $25,000, stalling the bullish momentum. After offering stiff resistance in August, the cryptocurrency revisited lows around $18,000 before returning to the bullish trend.
A breakout above $25,000 depends on the performance of technology companies, says Laurent Kssis, crypto trading adviser at CEC Capital.
It’s all dependent on how technology stocks perform in the first quarter, which explains why BTC isn’t pushing further,” Kssis told CoinDesk. Technology stocks report their first-quarter earnings after March.
Historically, bitcoin has followed Wall Street’s tech-heavy Nasdaq index. Recently, the 90-day correlation coefficient between the two increased to 0.75. Nasdaq fell by 2.4% last week, pausing a four-week winning streak that suggested high-risk assets such as bitcoin were on the rise.
Crypto traders are currently parking money in world’s largest dollar-pegged stablecoin tether (USDT), and the bitcoin rally will resume once that trend ends.
We simply ran out of breath when we broke $25,000 because the market is patiently awaiting realized profits parked in USDT right now to pile back into bitcoin and ether. “When BTC is rallying, USDT dominance tends to thin out,” Kssis said.
Tether’s dominance on the crypto market valuation has steadied around 6.5% since late January, according to charting platform TradingView, indicating that traders are rotating their money into the stablecoin. As bitcoin rallied in January, USDT’s dominance dropped from nearly 9% to 6.5%.
“Volatility is unlikely to diminish anytime soon,” says Paris-based crypto data provider Kaiko.
Paxos was specifically targeted by the U.S. regulatory agencies last week for its BUSD product, not Pax dollar, hinting at an indirect action against Binance, the world’s largest cryptocurrency exchange. Paxos issued BUSD, a Binance-branded dollar-pegged stablecoin.
Since then, long-term and short-term call-put skews have retreated to zero, indicating a neutral sentiment in the options market. Among sophisticated institutional players and retail investors, call-put skews measure the price difference between bullish and bearish call options.
Crypto exchange Bitfinex analysts said in a report shared with CoinDesk that the options market had exhibited bullish trends but now maintains a neutral outlook. “Investors now place roughly equal value on put and call options.”
Additionally, CoinShares data indicates that investors are withdrawing money from crypto funds. In the past week, digital asset investment products saw outflows totaling $32 million, the largest outflow since December 2022. More than $25 million was lost by bitcoin funds alone, while $3.7 million was inflowed by short bitcoin funds.
Since last week, concerns about sticky inflation have resurfaced, stalling the rally in risk assets, according to Griffin Blofin, a volatility trader at Blofin.
The expectation of an inflation rebound has appeared in many markets. Both the U.S. January CPI and the latest U.K. PMI data point to a relatively strong economy, raising the possibility of resurging overheating. As a result, the Federal Reserve and the ECB must maintain a hawkish policy and even return to a 50 basis point rate hikes,” Ardern explained to CoinDesk.
In Europe, a similar-sized hike in March is all but priced in, while the fed funds futures show a 15% chance of an increase next month.
The price of bitcoin changed hands at $24,650. Some market participants expect a breakout above the technical resistance at $25,000 to trigger a sharp rally.
A Telegram broadcast from Paradigm said: “We have tested the 25k resistance multiple times over the past week and failed. Hearing from our clients that we have the potential to gap higher if we break the range meaningfully,”