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Bitcoin bulls face test as BTC price corrects to $36k

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(Kitco News) - Thursday was a red day for the crypto market after a move by the SEC to delay several ETF decisions was the signal that traders needed to take profits on their recent gains and prepare for a correction lower before they look to reenter the market.

Stocks traded mixed as signs are beginning to emerge that the American consumer may need to cut back on spending in response to sticky inflation. At the same time, traders have also lost some of their conviction that the Federal Reserve will start to lower interest rates early in 2024.

At the closing bell, the S&P and Nasdaq finished higher, up 0.12% and 0.07%, respectively, while the Dow recorded a loss of 0.13%. West Texas Intermediate crude oil also fell 5% and trades just above $73 a barrel, its lowest price in four months.

Data provided by TradingView shows that after topping out at $38,010 late on Wednesday, Bitcoin (BTC) bears took control of the price action and pushed the top crypto lower throughout the trading day, hitting a low near $35,500 before dip buyers pushed it back above $36,000.

BTC/USD Chart by TradingView

The smackdown by bears resulted in “November Bitcoin futures prices [trading] weaker in early U.S. trading Thursday,” according to Kitco senior technical analyst Jim Wyckoff, who noted that the pullback “followed solid gains posted Wednesday.”

Bitcoin futures 1-day chart. Source: Kitco

“The BTC bulls still have the firm overall near-term technical advantage as a price uptrend on the daily bar chart remains in place,” Wyckoff said. “The path of least resistance for prices remains sideways to higher in the near term.”

While many have attributed the volatility to ETF speculation, Markus Thielen, an analyst at DeFi Research, said it had more to do with U.S. government developments.

“The key reason for this volatility was that the US government shutdown was averted, as this would have caused any Bitcoin ETF approval to be delayed at least until January 2024, if not longer,” he said. “ When we wrote our [previous] note, Bitcoin traded at 35,500, and prices have rallied to 37,800 during the last 24 hours (+6.4%).”

From here, he sees BTC rallying to $40,000, and potentially as high as $45,000 by the end of the year, due to a variety of reasons.

“We have two colossal options expiries on November 24 and December 29 with $3.7bn and $5.4bn open interest outstanding,” he said. “There are 85% more calls outstanding than puts, with the 40,000 strike having the most significant open interest. The closer we get to 40,000, the more people will have to buy Bitcoin to hedge themselves. There will be a broad interest in pushing prices to this 40,000 level. The odds are high that we reach this level.”

He noted that while there have been $1 billion worth of inflows into digital asset investment products over the past two months, an even more impactful development has occurred with the top stablecoin Tether (USDT).

“Tether is the more significant driver of this bull rally and minted nearly $4bn of USDT stablecoins,” Thielen said. “This shows that large market players are converting fiat into crypto, which is a crucial reason why Bitcoin, and altcoins, are seeing strong interest. FOMO is back, and traders are panicking.”

He also attributes some of the bullish momentum to dovish comments from members of the Federal Reserve Board and a resumption of the downtrend in U.S. inflation “after three to four months of gradually rebounding.”

“Based on our inflation model, this trend will continue, and inflation will see sub-2.0% in 2024,” he said. “This will cause the Fed to cut interest rates aggressively. US inflation is currently at 3.2% while interest rates are at 5.25% – a difference of 2.0%. If our inflation model is current, then this spread would even be 3.0% – so we could expect 200 basis points of rate cuts next year. This is bullish!”

Market analyst Doctor Profit noted that BTC has now pulled back to the MA20, and risks falling to the range between $33,000 and $34,000 if it loses support here.

Chartist JT agreed with this outlook, saying, “If we lost that level, we could easily see BTC slip a bit lower. As for the levels I’d be watching for, $33K-$34K would be ‘in play.’”

BTC/USD 1-day chart. Source: X

JT added that for investors who plan to hodl and aren’t interested in low-time frame trading, “don’t worry about this post, higher time frames are totally fine.”

Double-digit gainers in a sea of red

A large majority of tokens in the top 200 recorded losses on Thursday, while a half dozen tokens managed to record double-digit gains.

Daily cryptocurrency market performance. Source: Coin360 (YFI) registered the largest increase, spiking 28.26% to trade at $14,332, followed by a 20.1% gain for Render (RNDR), a 17.8% gain for Kaspa (KAS), and gains of 16.86%, 12.55%, and 11.6% for Beam (BEAM), Ordi (ORDI), and Avalanche (AVAX), respectively.

Memecoin (MEME) suffered the biggest loss, falling 20.9% to trade at $0.0313, while Celestia (TIA) lost 12.4%, and dYdX (ETHDYDX) declined by 9.5%.

The overall cryptocurrency market cap now stands at $1.38 trillion, and Bitcoin’s dominance rate is 51.1%.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.