Bitcoin Prices Are at a Crossroads as Cryptos Keep Falling. What Comes Next.

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Crypto prices are heading lower for a third day. Dreamstime

Bitcoin and other cryptocurrencies slide for a third day, giving back gains from the latest stage of a one-month rally as investor sentiment started August on the wrong foot after a great July.

The price of Bitcoin fell 3% over the past 24 hours to below $22,700. The largest digital asset has been grinding higher from around $19,000 a month ago to a peak of more than $24,000 last week, but has since slipped back. Bitcoin continues to trade at around one-third its all-time high near $69,000, reached in November 2021.

Bitcoin is recording losses for a third consecutive day in what could be a sign of recovery momentum waning, Craig Erlam, an analyst at broker Oanda, wrote in a note. There certainly were signs of this during the most recent rally which peaked a little shy of $25,000 and the corrective pattern thats formed over the last month and a half could easily be viewed as a bearish setup following the sell-off that preceded it.

From a technical perspective, analysts said the outlook for Bitcoin is mixed. With the June bottom below $18.00 firmly behind it, digital assets seem to be on the up-and-up, but the all-time highs and $3 trillion crypto market cap from nine months ago remain far off as the macro outlook continues to be shaky .

A greater loss of short-term momentum would support a retest of support around $18,300 to $19,500, Katie Stockton, managing partner at technical research group Fairlead Strategies, wrote in a note. A decisive breakout above $25.00, despite indications to the contrary, would support an extended relief rally and test of former support near $30,000.

Bitcoin and its peers should in theory trade independently of traditional finance and indeed are often influenced by factors within crypto, like the meltdown of stablecoin Terra but have shown a correlation with other risk-sensitive assets, like stocks. As such, cryptos have followed the S&P 500 and Nasdaq into a deep selloff this year amid soaring inflation and the risk of recession from much tighter monetary policy.

After a fantastic July for stocks and cryptos alike with the S&P 500 seeing its best month since November 2020 and Bitcoin climbing almost 25% investor sentiment has been shaky in August. The latest macro concern, alongside recession risk, has been geopolitical tensions over Taiwan. A dampened appetite for risk could be adding pressure to cryptos, which may be poised for another leg lower in the weeks or months to come, according to Stockton at Fairlead.

Intermediate- and long-term momentum indicators are still pointing lower, increasing risk of another significant downdraft in the months ahead, Stockton said.

Beyond Bitcoin, Ether the second largest crypto, which has recently outperformed its bigger peer dropped 7% to just above $1,550. Altcoins, or smaller cryptos, were similarly weak, with Solana losing 7% and Cardano 6% lower. Memecoins exhibited more of the same, as Dogecoin and Shiba Inu each shed 5%.

Write to Jack Denton at [email protected]

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