Wednesday’s activity in the crypto market is being called “boring” by many in the ecosystem following the volatility and gains witnessed over the past few months in the lead-up to the approval of the first spot Bitcoin (BTC) ETF.
While the price action is somewhat subdued, it's not entirely unexpected, as analysts note that crypto is known for extended periods of sideways trading following notable market-wide rallies.
Stocks slipped lower amid comments from financial experts at home and abroad that pushed back against expectations that the Federal Reserve will lower interest rates as soon as March. ECB president Christine Lagarde joined Fed governor Chris Waller in warning that investors may be unrealistic in assuming that rate cuts are imminent, which gave investors reason to pause and reevaluate their exposure to the market.
A surging dollar further complicated matters as the DXY hit a high of 103.707, its highest level since Dec. 13. At the closing bell, the S&P, Dow, and Nasdaq all finished lower, down 0.80%, 0.45%, and 0.90%, respectively.
Data provided by TradingView shows that Bitcoin traded in a range between $42,163 and $43,200 on Wednesday, with neither the bulls nor the bears gaining the upper hand to drive the price action.
BTC/USD Chart by TradingView
Kitco senior technical analyst Jim Wyckoff noted that “January Bitcoin futures prices [were] a bit weaker in early U.S. trading Wednesday,” in his morning Bitcoin update.
Bitcoin futures 1-day chart. Source: Kitco
“Bulls still have the firm overall near-term technical advantage but need to show fresh power soon to keep alive a price uptrend on the daily bar chart,” Wyckoff said. “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.”
“After roughly two weeks of trading, Bitcoin is up +3% this year. While it’s undoubtedly too early to annualize those returns (+72%), the start of the year is relatively slow compared with the market expectations,” said Markus Thielen, head of research at Matrixport. “Last year, Bitcoin generated +155% returns for investors.”
He noted that “While the Bitcoin ETF inflows are weak… the size of the ETF trading volume shows that Bitcoin will become a key pillar of financial products as market makers and brokers must embrace an asset with that much activity. Options and other derivatives products will shortly launch on these ETFs, and while the investment advisors might have yet to be ready to market the product, this will change over the next few weeks.”
In the near term, Thielen said that caution around Bitcoin is warranted “due to the strong 45,000 resistance level and the typical Q1 consolidation period that presets the strong Q2 to Q4 returns that we see during Bitcoin halving years and US election years.”
“As a reminder, the average performance of 2012, 2015, and 2020 project a rally of +17% (49,371 to be reached within the first or second week of January), only to gradually decline towards 36,300 until mid-March,” he said. “Historically, Bitcoin has tended to rally +192% during those years and we remain overly bullish for 2024.
Average Bitcoin performance during Q1 (frey avg. 2012, 2016, and 2020) – 2024 in Blue. Source: Matrixport
“Of course, each year is different, and any analog comparison should only be considered a rough estimate,” he said. “A year ago, market participants were overly pessimistic about the prospects of the US economy and most economists expected inflation to remain elevated.”
Thielen also pushed back against expectations for a rate cut in March, saying that the market has already priced in six cuts. “A timid 25 basis point cut by June appears more likely to us, and we expect only 3-4 cuts this year. This would undoubtedly disappoint the market, and there will likely be some spillover from TradFi into crypto, with Bitcoin likely absorbing most of the disappointing liquidity news,” he said.
“This is also why other assets, such as the Nasdaq, have had a weak start this year,” he added. “The Nasdaq is only up +1.2% year-to-date, and the market might be waiting to hear about the Fed’s view on rate cuts during the January 31 and the March 20 FOMC meetings.”
“Unless Fed Chair Powell provides a clear path for rate cuts in his January post-meeting Q&A, we expect stocks to sell off or consolidate until the March FOMC meeting gradually,” he said. “This will likely impact Bitcoin, which has not become a TradFi asset.”
Thielen concluded by recommending that “investors should use any weakness in Q1 to add to their crypto holdings, as our analysis still projects higher prices later in the year.”
Mixed day for altcoins
It was a mixed day for the altcoin market, with a large majority of tokens in the top 200 recording losses.
Daily cryptocurrency market performance. Source: Coin360
A newer meme token – dogwifhat (WIF) – led the field with an increase of 53.4%, followed by a 27.6% gain for Tellor (TRB), and a 14.7% increase for Xai (XAI). Blur (BLUR) was the biggest loser, declining by 7.1%, while MetisDAO (METIS) lost 7.3%, and Lido DAO (LDO) fell 7%.
The overall cryptocurrency market cap now stands at $1.69 trillion, and Bitcoin’s dominance rate is 49.7%.
