Bitcoin bounces after dip below $33,000, but analysts still expect deeper losses

Published Mon, Jan 24 20222:34 PM ESTUpdated Mon, Jan 24 20225:00 PM EST

Bitcoin bounced after briefly falling below $33,000 and hitting a new low, but further declines may be ahead for the cryptocurrency, analysts say. The price of bitcoin last climbed 5.6% in afternoon trading to $37,183.25, according to Coin Metrics. That was after sliding to $32,982.11 earlier in the day. Investors have been shedding their positions in crypto and other risk assets all month as concerns intensify that the Federal Reserve is preparing to hike interest rates and tighten monetary policy. Last week, the tech-heavy Nasdaq fell into correction territory. Stocks extended their declines Monday — the Dow fell more than 1,000 points and the S & P 500 briefly dipped into correction territory — before turning positive. "We are of the mind that bitcoin could potentially dip below $30,000 and ether could trade below $2,000 before we start to see some stabilizing," said Leah Wald, CEO at digital asset investment manager Valkyrie Funds. "Looking longer term, the digital assets we have the strongest conviction in have the strongest backing and should hopefully be able to weather this storm," she said. "Until then, we are likely to continue this Wild West dynamic with a significant period of choppy trading this year that mirrors 2020 before we return to a risk-on environment and start to see significant moves upward in Q4." Michael Rinko, an analyst at global macro hedge fund Pervalle Global, noted that $30,000 was also seen as a key level for bitcoin that eventually became a selling point for buyers and marked the bottom. However, bitcoin is still relatively nascent and that recent history may not be enough to say if the same will happen now. Rinko said he thinks bitcoin could drop even further, however. "It's difficult to think of a single positive macro catalyst over the next three to six months that could reverse this recent price action, and more ominously, there are several dangerous events on the horizon — the [Federal Open Market Committee] meeting Tuesday, inflation expectations and war in Ukraine — that will force investors to de-risk," Rinko said. Amber Ghaddar, cofounder of AllianceBlock, said she expects bitcoin to trade sideways for "several weeks, except for an idiosyncratic white swan event that can lift it back to the $45,000 range," she said. "If markets remain risk-off, we see another leg down to the $28,000 range," she added. "Looking at the May 2021 slump we see some similarities, with whales taking profit a few months before the correction, followed by the relative strength index dipping below 30 and staying there for several weeks." A key threshold for the longer term Katie Stockton of Fairlead Strategies is waiting to see how bitcoin ends this week, looking for a breakdown before $40,000 in advance of anticipating a sharper drop to the $30,000 level. "The emotionally charged downdraft could be a shakeout (i.e., a false breakdown), making it important to use the qualifier of two weekly (Friday) closes below key levels," she said. "Because shakeouts are common, we would await confirmation of a breakdown below about $37,400 before taking a bearish long-term stance." Stockton also noted bitcoin ended last week below that threshold. She said it is "essential" that the cryptocurrency finish this week above $37,361 "to allow its breakdown to remain unconfirmed."

Chesnot | Getty Images

Bitcoin bounced after briefly falling below $33,000 and hitting a new low, but further declines may be ahead for the cryptocurrency, analysts say.