Bitcoin correction drags on

Bitcoin failed to break the $40K threshold again, remaining within a corrective scenario. Nevertheless, the support level of around $35K has not been broken, and crypto market participants are not panicking. After impressive growth in October-January, the benchmark cryptocurrency needs a consolidation period. The $33K-$40K price fluctuations fit into the idea of an acceptable fluctuation range for this market. On the other hand, the sharp bullish momentum is now on pause.

The total capitalization of the crypto market holds just above $1 trillion, occasionally falling below that level due to waves of corrections. However, the market is fluctuating near a historic high which was unreachable even during the rally at the end of 2017.

Another positive sign can be seen in the decline of the Crypto Fear & Greed Index for Bitcoin and major cryptocurrencies. Since last week, the index has fallen 11 points to a value of “79,” which although still consistent with the “extreme greed” mode, is still much closer to a neutral level. The RSI on the daily charts moved out of the overbought zone, reflecting neutral values.

Biden’s approval of a new $1.9 trillion stimulus package may also be seen by market participants as a catalyst for Bitcoin and the market as a whole. The global economy and the situation around the coronavirus are not conducive to a return to growth, so investors may increasingly look to cryptocurrencies as a means to diversify their investments.

In early 2021, the focus will be on renewed investment from big capital, as well as the volumes of PayPal and other large companies that have announced their interest in the cryptocurrency market. Also, the tumultuous price rally runs the risk that regulators will once again focus on the sector, primarily in the United States. As we have seen with XRP, lawsuits from the SEC could put an end to any cryptocurrency, no matter how promising its technology may be.

The FxPro Analyst Team