Price charts signal further declines, according to technical analysts. Bitcoin fell below its Ichimoku cloud support on a weekly chart, with secondary support only standing at around $27,200, said Katie Stockton, founder and managing partner of Fairlead Strategies.
She’s not the only one seeing more downsides.
“Bitcoin appears to be breaking a pivotal minor two-month trend on Friday’s pullback, likely triggering weakness to test January lows,” Mark Newton, technical strategist at Fundstrat, wrote in a research note on Friday. He expects an initial pullback to $36,300, “but breaks of this level should lead to a full retest of $32,950 without too much trouble.”
Despite all of its recent losses, Bitcoin remains in the middle of a year-to-date trading range between around $35,000 and $45,000. The digital currency is moving strongly in line with the tech-heavy Nasdaq 100 and is negatively correlated with the dollar.
With the Fed expected to hike rates in 50 basis point increments in the coming months to fight inflation, some of the factors that have fueled cryptocurrencies’ dramatic gains over the past two years are reversing.
“As it becomes more valuable to hold dollars, some investors may reallocate Bitcoin or gold to the dollar,” a Nydig team wrote in a report on Friday. “Like Bitcoin’s negative correlation with the dollar, Bitcoin’s negative correlation with real rates has only emerged in the past two years.”
Bitcoin will still be primarily driven by fundamental factors, such as user growth and network usage, but understanding the changing macro relationships is important, they said.