A corrective week in the cryptocurrency market

26.02.2021 17:10|Conotoxia Ltd Analyst Team

Bitcoin and the other major cryptocurrencies seem to be losing from the blow that came on Monday. There was a bump in the market then, which may have been a consequence of the influx of tens of thousands of BTC into cryptocurrency exchanges.

As a result, bitcoin may be on track to fall more than 20 percent this week, to below $47,000. This would be, in total, the biggest drop since January, when the price plunged more than 30 percent. However, this time the discount in dollar terms was the biggest ever, as it rallied from a peak to a low of $1.4k.

Bitcoin touched the $58,000 level for the first time on Sunday. The gains could be fueled by interest from investors and companies around the world. Earlier, there was news of a large bitcoin purchase by Tesla, and a little later, the announcement of a BTC purchase of more than $1 billion by Microstrategy.

Investors also lived to see the world's first bitcoin ETF launched in Canada. However, unexpected supply collapsed the listing, which still deepened its weekly low in the $44,000 region on Friday. Nevertheless, digital currency still seems to be up about 60 percent since the beginning of the year. The trend seems to be driven by institutional purchases, as well as a change in the perception of bitcoin as a hedge against potential inflation resulting from massive central bank and government stimulus measures.

From the perspective of further developments in the bitcoin market, the sharp discount seems not to deter investors from putting money into the aforementioned first BTC ETF. After a week since its launch, the fund bought more than 10000 bitcoin worth almost half a billion dollars. On the other hand, data from the CryptoQuant website shows that a total of around 25,000 bitcoin has flowed off exchanges this week, from Monday to Thursday. This may also show that the event of the previous Sunday, where a gigantic supply appeared, was so far a one-off and did not entail further inflows. To date, it remains unclear who decided to sell about $1.5 billion worth of BTC, but we do know that for the moment, those willing to continue putting up such large sell orders may not be there.

From the perspective of cycles in the bitcoin market, we could see similar fluctuations in 2017. At that time, the price first fell from $1,100 to $786 before rising to over $1,200 and then retreating back to $940. In 2021, on the other hand, the price first fell from over $40,000 to $30,000, then rose to $58,000 before further retreating to $44,000. In 2017, after a correction under $1000, the price reached almost $3000 in the next upward move. If history were to repeat itself and there is no new significant supply on the exchanges, the next potential target levels for BTC could fall in the region of $120-150,000.


Daniel Kostecki, Chief Analyst Conotoxia Ltd.

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

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