Analysts are noting the correlation between sagging tech stocks and crypto.
Bitcoin continued to slide, falling under $42,000. The largest cryptocurrency by market capitalization has been languishing well off last week’s high as investors worry about dicey macroeconomic conditions, including supply chain issues, the ongoing coronavirus pandemic, rising inflation and a slump in technology markets.
At the time of publication, Bitcoin was trading at $41,866, down 1.4% for the day.
“The market is digesting a number of things,” Osprey Funds founder and CEO Greg King told CoinDesk TV on Wednesday. He added: “Risk assets like crypto are going to sell off or experience a bit of churn as the market adjusts to a different macro environment.”
Ether followed a similar path and was slightly down for the day, trading between $3,000 and $3,200 throughout the previous 24 hours. At the time of publication, ether was at 3,144, a 1.7% drop for this period. Most of the major altcoins spent their day in the red.
King noted the impact of inflation on the economy, which he said “nibbles away at your purchasing power over long periods of time,” and highlighted the correlation between the recent decline in tech stocks and crypto. The tech-heavy Nasdaq fell 1.1% and is off over 10% from its all-time high November. Shifts of more than 10% are thought of as market corrections. The S&P 500 and Dow Jones Industrial Average both dropped nearly 1%.
Still, King sees crypto rebounding in the long term. “We are still bullish on the space and I would suspect that, at the end of the year, values will be much higher than they are.”
Bitcoin (BTC) continues to hold support above $40,000 as momentum improves on intraday charts.
The cryptocurrency is down about 4% over the past week, although multiple oversold readings suggest buyers could remain active into the Asia trading day.
Still, upside appears to be limited toward the $43,000-$45,000 resistance zone. And $48,000 could present another hurdle for buyers given the series of lower price highs since November.
The relative strength index (RSI) on the four-hour chart approached an oversold level on Tuesday, similar to what occurred on Jan. 5, which preceded a near 10% price bounce a few days later.
On the daily chart, the RSI has remained in oversold/neutral territory for about a month, which is common during a price downtrend.