Why is the Bitcoin rally slowing down despite Biden's praised order on cryptos and the digital dollar?
Bitcoin returns to falls on Thursday, after Wednesday's rally that took the queen of digital assets to highs near $42,500. The rest of the market also followed in the footsteps of the most traded of the electronic currencies and bulky gains were seen for some tokens, such as Terra or Avalanche. However, today they are dyed in red and are down 5% on average. Ethereum, which marked highs in the vicinity of $ 2,800 also corrects and the total capitalization settles at $ 1.75 trillion.
The surge in buying came on market relief after learning of U.S. President Joe Biden's plans for the crypto industry. The White House published and initialed an executive order that tasked several government agencies with a holistic approach that will help the government of the world's leading power to sort out the crypto space. Market participants anticipated an aggressive and censorious stance from Biden with the market, however, the approach is constructive and supports both Bitcoin and a digital dollar, as experts indicated.
Bitcoin soared up to 11% on Wednesday amid optimism about the trajectory of U.S. regulation of digital assets. Those gains proved short-lived as traders digested the news, and the token is back trading near the middle of the range in which it has spent most of the past two months.
The S&P 500 and Nasdaq 100 index futures turned negative at about the same time as the Bitcoin price did. The cryptocurrency has been relatively correlated with U.S. stocks since the start of the Covid-19 pandemic, increasing this coupling since last summer.
"Having realigned with risk assets, Bitcoin is riding the wave of risk, crypto-style," commented Craig Erlam, analyst at Oanda. The optimism seen in the markets on Wednesday, in stocks, oil and metals "looks fragile at best, so while cryptocurrency traders may be looking eagerly at $45,500 and wondering 'what if,' we are one headline away from these gains being quickly erased," the expert warned, recalling that this "has been the case for weeks now."
On the other hand, from a technical analysis point of view, the price was not able to hold above $40,000 and was actually rejected in the $42,500 - $42,700 area, where a resistance can be seen on weekly charts.
Regarding the very short term, "we have the Bitcoin price in the no man's zone, somewhat away from key supports and resistances. There is an important support in the rising straight line that joins each and every one of the successive rising lows since last summer," stated José María Rodríguez, analyst at Bolsamanía. "Not to mention the January lows ($32,855) and February lows ($34,295). And above, we have the latest declining highs with special relevance in the February highs ($45,905)," he added.
"There is still a lot of work to be done, but there is no doubt that above $46,000 we will have an important sign of strength for the king of cryptocurrencies. It would undoubtedly be a before and after. In the same way that the perforation of the January lows would be a new cold water pitcher", the analyst concluded.