Bitcoin’s rally this year has caught a lot of attention. Yet the coin has seemingly stopped its advance at $28,000, a key trading point around which it’s been meandering in recent days.
The largest cryptocurrency has hit a proverbial wall at that level, moving slightly above or below it in what analysts are calling range-bound trading. For the last three weeks of trading, Bitcoin has been trading within 15% of a key trendline—its average price over the past 30 days. Bitcoin was little changed at around $28,230 as of 10:35 a.m. in New York.
“It’s chopping around that level right now,” Alex Coffey, TD Ameritrade senior trading strategist, said in an interview. “It’s sort of just drifting.”
Bitcoin, in the wake of the fallout of a handful of U.S. lenders last month, staged a rally that brought it from around $20,000 to $28,000 in a matter of days. As reasons for its surge, investors resurfaced longtime narratives—that the coin is a hedge against inflation and can be a safe haven amid turmoil at traditional banking institutions. The uptick—along with a broader year-to-date surge—helped it score the top spot among major assets in terms of performance in the first quarter.
But the fact that the coin’s advance has stalled out is no surprise to Aya Kantorovich, former head of institutional coverage at FalconX.
Bitcoin faithfuls drove the upward price action in March, but fundamentally, little has changed in the world of digital assets.
“You’re not necessarily seeing net new users,” said Kantorovich. Chaos in the financial sector inspired Bitcoin bulls to buy more Bitcoin, but institutional investors sought safety elsewhere in products like ETFs or mutual funds. “The immediate reactions will typically be either retail or already engaged crypto traders or institutions.”
Crypto has done little to inspire new buy-in. There’s not necessarily “a narrative for any price action currently,” Kantorovich added.
Meanwhile, speculators have turned their attention to other tokens such as Dogecoin, which surged as much as 30% this week after Twitter featured the dog meme on the home button to the site. Dogecoin was lower for the first time this week at about 10 cents.
Other diversions included Donald Trump-themed NFTs, which saw a rise in sales volume when the former U.S. president was indicted Tuesday.
Crypto market liquidity and trading volumes have dried up as investors who had waded in during the pandemic stay on the sidelines following 2022’s scandals and implosions, including that of FTX.
Declining volumes are “perhaps to be expected in a range-bound market, but perhaps not a healthy signal, as could be construed as an indication of no fresh buyers at current levels,” wrote B2C2’s Adam Farthing in a recent note.
Chris Newhouse, a derivatives trader at crypto investment firm GSR, says the crypto market is typically driven by short-term narratives as well as by traders following different trends. There are some key economic data results that are getting released in the coming days, and many investors might be waiting for them before they make any positional changes.
“Crypto is very reflexive,” he said. “I think it makes sense to wait and see what happens.”
This article was provided by Bloomberg News.