February 25, 2022
Crypto Heads Higher Amid Uncertainty
Dear Subscriber,
By Sam Blumenfeld
Both crypto and traditional equity markets have seen substantial volatility since the beginning of February. During yesterday’s trading, Bitcoin (BTC, Tech/Adoption Grade “A-”) sunk to a low of $34,300 before a burst of bullishness pushed it to peak at $39,700 and closing at $38,300.
That momentum continued into today, with BTC up 3% and looking to make another run at the key $40,000 level. Bitcoin’s market dominance has also increased by 70 basis points to 43.1%.
These wild swings will likely continue as breaking news developments impact financial markets.
Bitcoin continues to trade in tandem with technology stocks and other risk assets, and its heightened correlation is expected to extend given the uncertainty clouding current market conditions. For now, investors will have to contend with volatile movements.
Despite the recent climb, Bitcoin is still trading below its 21-day moving average following the week-long drop from $46,000 beginning on Feb. 16. It would need to retake $41,300 to truly regain its short-term momentum, but that will entirely depend on how the market reacts to developments in Ukraine and expectations of the Fed’s rate hike schedule.
Here’s Bitcoin’s price in U.S. dollars via Coinbase Global (COIN):
Ethereum (ETH, Tech/Adoption Grade “A”) and other altcoins have followed Bitcoin’s movements up to now and will likely continue to do so.
ETH has found support at both $2,500 and $2,300 during the past week, and it would be a positive sign if the asset can maintain itself above $2,700.
Ethereum currently trades below its 21-day moving average near $2,900. Trying to overtake it could be tough given the market’s recent negative trend and escalating tensions worldwide. If ETH can manage to pass $2,900, it would bode well for altcoins in the short term.
Here’s Ethereum’s price in U.S. dollars via Coinbase:
Index Roundup
The crypto market struggled mightily throughout the week as investors grappled with the Russian invasion into Ukraine. No market cap segments were spared, but as is usually the case, the most established cryptocurrencies held their value the best.
The Weiss 50 Crypto Index (W50) fell 16.01% as the entire crypto market faced strong selling pressure.
The Weiss 50 Crypto Ex-BTC Index (W50X) dropped 18.22%, confirming Bitcoin’s strength compared to the rest of the market.
Breaking down this week’s performance by market capitalization, we see that the large caps slid the least, but they still took damage. The Weiss Large-Cap Crypto Index (WLC) slumped 15.18%.
The mid-caps were the biggest underperformers, as shown by the Weiss Mid-Cap Crypto Index (WMC) sliding 20.59%.
The small-caps performed marginally better than the mid-caps, with the Weiss Small-Cap Crypto Index (WSC) declining 19.33%.
Notable News, Notes and Tweets
What’s Next
The crypto market will likely continue to face significant volatility from Federal Reserve policy expectations, geopolitical instability and negative sentiment from impending regulations. The Biden Administration was expected to issue an executive order this week, but that could easily be delayed given its need to focus on the crisis in Ukraine.
While whispers of regulatory changes usually spook investors, smart regulation should only benefit the crypto space and speed up institutional adoption over time. Regulations are inevitable, and they will be critical for crypto’s push to become a mainstream segment of both peer-to-peer and business transactions.
A record 76.5% of Bitcoin’s supply remains untouched, supporting our outlook that the short- to medium-term uncertainty should fade as the crypto market continues maturing.
Strong-handed investors recognize that the constantly progressing adoption of crypto should drive a boom over the long term.
Best,
Sam
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