Bitcoin’s Rally Loses Its Power. Expect Decline Next Week.

Bitcoin and other cryptocurrencies fell again on Thursday, signaling a lessening of momentum in the digital asset rise that began in 2023. Cryptos are vulnerable to a drop ahead of a significant trigger next week, which could unleash further volatility.

Bitcoin’s price has fallen 2% in the last 24 hours to $22,700, near the bottom of the trading range that has dominated for much of the previous two weeks. The greatest digital asset is still up 40% this year, having risen from two-year lows in late-2022 to the highest levels since last summer.

“Bitcoin’s strong start to the year appears to be over for now,” said Edward Moya, an analyst at broker Oanda.

While Bitcoin and other risky assets such as equities got off to a terrific start in 2023, with one of Bitcoin’s finest winning streaks in years, cryptos have since moved lower with the Dow Jones Industrial Average and the S&P 500. Last year, under a difficult macro backdrop of high inflation, increasing interest rates, and recession threats, digital assets, and stocks were tightly intertwined, with both asset classes gaining in January as investors became hopeful that the worst was past.

That optimism has faded as traders speculate about the Federal Reserve’s next move on interest rates. Central bank officials have shown a more aggressive tone on monetary policy in their speeches this week. Traders are now looking ahead to next week’s key U.S. consumer inflation data, likely to be a significant catalyst for cryptocurrencies and change expectations for future rates.

Until then, don’t expect much from digital assets. In fact, after rallying so wildly at the beginning of the year – and amid signs that these gains may be primarily built on sand with a weak technical and fundamental backdrop – perhaps some decline should be expected.

“After hitting some key technical resistance just above the $24,000 level, Bitcoin is entering consolidation mode until we see the next big move in bond yields,” said Oanda’s Moya. “Bond market volatility will be insane after the Valentine’s Day inflation report, which might mean Bitcoin could drift towards the $20,000 level if stocks get hammered over the next few sessions.”

Beyond Bitcoin, the second-largest cryptocurrency, Ether, fell 2% to $1,630. Smaller cryptos or altcoins performed more inconsistently, with Cardano falling 3% but Polygon rising 4%. Memecoins were weaker, with Dogecoin falling 4% and Shiba Inu falling 5%.