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(Kitco News) - It was another day of sideways price action in the cryptocurrency market on Thursday as U.S. lawmakers inched closer to a compromise on the debt ceiling but ultimately entered the long Memorial Day weekend without a deal.
On Wednesday night Fitch warned it might downgrade the United States' AAA credit rating, the first notable consequence of the stalled negotiations. Despite this development, two of the three major stock market indices trended higher on the day, in part due to a surge in the price of Nvidia (NVDA), which helped bolster the Nasdaq.
At the close of markets, the S&P and Nasdaq finished in the green, up 0.88% and 1.71%, respectively, while the Dow suffered a slight loss of 0.11%.
Data provided by TradingView shows that Bitcoin (BTC) kicked off the trading day with a plunge to a daily low of $25,950 before bulls rallied the troops to bid it back above $26,500 in the afternoon, resulting in a 0.79% gain at the time of writing.
BTC/USD Chart by TradingView
The early morning price plunge resulted in June Bitcoin futures prices hitting a nine-week low overnight, according to Kitco senior technical analyst Jim Wyckoff, who noted that prices stabilized after the U.S. market opened.
Bitcoin futures 1-day chart. Source: Kitco
“The bears have re-established a price downtrend on the daily bar chart and have gained the near-term technical advantage,” Wychoff warned. “The path of least resistance for prices is now sideways to lower.”
Keep an eye on Treasury yields
According to Markus Thielen, the head of research for Matrixport, “Bitcoin prices are struggling as the 10-year Treasury yields have climbed above the critical 3.5% level,” a number which he previously identified as a signal to adopt either a neutral or short position for BTC.
Bitcoin (LHS) vs. U.S. Treasury Yields (inverse, RHS). Source: Matrixport Technologies
“As prices are now at 3.7%, we are not surprised that Bitcoin is selling off,” he wrote. “Investors should now patiently wait until the yields are losing their upside momentum before they buy crypto again.”
Digging into the data, Thielen noted that trading volumes have declined, and as a consequence, Bitcoin's price is experiencing downside pressure. “Overall, network
activity is mediocre, momentum is slowing and prudent risk management is advised.”
“Nevertheless, as negative investor positioning is extreme in equities, the SP500 could experience a large short-squeeze rally which would also help crypto,” he wrote. “Overall, we still believe that risk assets (stocks + crypto) could rally this year as inflation will come down – based on our inflation model which we had previously shown.”
While Thielen urged investors to remain patient and watch Treasury yields, MN Trading founder Michaël van de Poppe posted the following tweet earlier in the day which suggested that if BTC managed to run back up to $26,600, then the low is likely in.
#Bitcoin still swimming around the lows. Last night we've seen a sweep of the low at $26.1K, no sweep of $25.8K yet.
— Michaël van de Poppe (@CryptoMichNL) May 25, 2023
Today is probably the decisive day for trend-based perspectives.
If we run back up to $26.6Kish, I think we've seen the low.
Looking at longs. pic.twitter.com/O4R6SskGfN
Based on the afternoon spike in Bitcoin price and Poppe's observation, the current price level of $26,570 may represent a good starting point for a long position.
Altcoins tread water
On the whole, altcoins remained relatively unchanged in trading on Thursday as evidenced by the total cryptocurrency market cap, which was virtually unchanged since Wednesday.
Daily cryptocurrency market performance. Source: Coin360
The one double-digit gainer in the top 200 for the day is SingularityNET (AGIX), which is up 13.58% and trades at $0.29. The biggest loser on the day is Waves (WAVES), which is down 7.12% on the 24-hour chart but remains up 13.77% on the seven-day chart.
The overall cryptocurrency market cap now stands at $1.11 trillion, and Bitcoin’s dominance rate is 46.2%.
