(Kitco News) – Tuesday saw cryptocurrency prices continue to slide lower, albeit at a reduced rate than on Monday, as traders look for signs of a potential bottom for Bitcoin (BTC), which has fallen 15.5% below its record high of $73,450, established last Thursday.
Stocks opened lower but managed to climb back into the green as the day progressed amid the start of March’s Federal Open Market Committee (FOMC) meeting, with Fed officials discussing whether it's appropriate to start to slow the pace of its balance sheet runoff – also known as quantitative tightening – and debating the right time to announce the first interest rate cut.
At the close of markets, the S&P, Dow, and Nasdaq finished higher, up 0.56%, 0.83%, and 0.39%, respectively.
Data provided by TradingView shows that Bitcoin bulls lost support at $67,000 in the early hours on Tuesday after an anonymous whale caused a flash crash in BTC price on BitMEX by selling 977 BTC on the open market, with low-ball orders of $9,800 being filled on the exchange before the selling was done.
While the flash crash was limited to just the spot market on BitMEX, some traders worried that it would ripple out to other markets as similar sell-offs have done in previous cycles, leading many to resist buying the dip until the circumstances surrounding the mass liquidation become clearer.
BTC/USD Chart by TradingView
Bitcoin hit a low of $62,355 near midday and has since climbed back above support at $63,800. At the time of writing, BTC trades at $63,880, a decrease of 4.85% on the 24-hour chart.
All part of the normal, volatile crypto bull market cycle
“Bull markets tend to give a few deeper corrections – deep enough to cleanse some of the overleveraged euphoria, rather than just 5% wicks that get bought up immediately – and we’re seeing one of those now,” said market analyst Bloodgood in his latest market report. “We’ve got a month to go until the Bitcoin halving, so a pre-halving dip would be far from unexpected given how BTC performed recently.”
“Meanwhile, all eyes are on the FOMC meeting tomorrow, especially as the market seems to be reducing its expectations for rate cuts this year,” he added. “While the consensus for the current Fed rate decision is essentially unanimous – namely that rates will remain unchanged – any comments regarding the future course of monetary policy will send shockwaves through the markets. This, of course, means that taking leveraged positions around the time of the press conference would be even riskier than usual.”
Bloodgood noted that the 2021 ATH for Bitcoin is now acting as resistance, as evidenced by the 8% red candle that resulted after bulls were rejected at that level.
“Maybe this was predictable since memecoins were taking off, and many started positioning heavily in alts,” he said. “This euphoria didn’t last long; alts started bleeding as soon as Bitcoin closed below the 2021 ATH.”
Bloodgood said he “remains optimistic in spite of the dip,” as this was “the first test of the ATH, which is an obvious level to take some profits, especially if you were buying in 2022 and early 2023.”
“Moreover, something similar happened in November of 2020, when Bitcoin tested the 2017 ATH for the first time,” he noted. “First a rejection, a few weeks later the breakout. So nothing is lost yet; however, the $60k level must hold if we want to see BTC push into new highs any time soon.”
“For now, stay patient and don’t try to knife catch, as we could go lower if these levels don’t hold,” Bloodgood concluded.
According to Caspar Sauter, co-founder of the perpetual futures decentralized exchange D8X, the bull market is just getting started and this pullback is a sign of healthy price action.
“Just look at last week’s $540m daily net inflows into BTC spot ETFs,” Sauter said in a note shared with Kitco Crypto. “This number continues to grow as BTC ETFs are being offered on more brokerage platforms, and interest from clients with advisory accounts increases due to the recent price moves.”
“Large BTC price swings, such as the swing that occurred over the weekend, are not out of the ordinary for an asset class that has such a huge volatility,” he added. “Looking back over past cycles, we’ve seen BTC rallies fuel the rest of the industry – and I don't see any reason for why this should be different this time.”
Mixed day for the altcoin market
Altcoins continued to bleed in response to Bitcoin’s weakness, with most tokens in the top 200 trading in the red on Tuesday, while a half dozen tokens managed to post double-digit gains.
Daily cryptocurrency market performance. Source: Coin360
DeFi protocol Ondo (ONDO) led the gainers with an increase of 14.5%, followed by gains of 14.3% for Fantom (FTM) and 11% for Open Campus (EDU). Solana-based DeFi protocol Raydium (RAY) and Ethereum–based DeFi protocol Mantra (OM) were the biggest losers, with declines of 18.6% and 13.8%, respectively, while Jupiter (JUP) fell 12.9%.
The overall cryptocurrency market cap now stands at $2.42 trillion, and Bitcoin’s dominance rate is 52%.
