Crypto is testing an important trend line

Crypto is testing an important trend line

Market Overview

The crypto market has lost just over 6% over the past seven days, falling back to $2.46T by the start of trading in Europe on Monday. The market is now testing the 200-day moving average, which we see as an important target for the bears. The key question now is whether the bulls are ready to return to buying. Beyond cryptocurrencies, the same question applies to US big tech, which is heightening uncertainty and forcing the market to wait for signals from outside, possibly from politicians. Declines predominate among the most liquid coins, but there are also altcoins on the rise, so the ratio of gainers to losers is roughly 1:7. Over the past 24 hours, the top gainers have been Basic Attention Token (+2.6%), Immutable (+1.8%) and Dash (+0.5%). XRP (-5.7%), Algorand (-5.3%) and Ethereum (-5.1%) are down. 

Bitcoin is trading just above $74K, having come under heavy pressure on Sunday and fallen to $73.5K. The subsequent rapid rebound to $75.7K proved short-lived. Bitcoin managed to bounce off the 200-day moving average, but we see this as a technical move, with the bulk of capital only arriving closer to the US trading session. It is then that the main battle for the long-term trend line will take place. A rebound or a decisive break below this level could set the tone for the trend over the next few days or even weeks, so it is worth paying close attention to this situation.

News Background

Outflows from spot Bitcoin ETFs in the US have continued for four of the last five weeks, totalling $1.28 billion last week, according to SoSoValue. The weekly outflow was the highest since the end of June, more than double October's total. 

Outflows from spot Ethereum ETFs in the US have now continued for six consecutive weeks, totalling $365.3 million for the week. 

A four-month record outflow from US spot Bitcoin ETFs occurred against the backdrop of a slump in the Nasdaq index. The artificial intelligence (AI) bubble has started to deflate, and Bitcoin could be next to burst, said Peter Schiff, head of Euro Pacific Capital and a crypto-sceptic. 

Retail investors have shown no signs of a surge in activity on spot crypto exchanges over the past two and a half years. As a result, traders have lost their usual benchmark, which previously signalled market peaks and troughs, notes an analyst at BaykusCharts. 

The People’s Bank of China has launched an investigation into companies and individuals involved in Solana’s operations in the country. The regulator cited a decree classifying the domestic cryptocurrency business as an illegal financial activity. 

According to Reuters, Democratic Senator Elizabeth Warren, known for her criticism of the crypto industry, is considered the frontrunner to chair the US Senate Banking Committee following her party’s victory in the midterm elections. Should she be appointed, she will have greater scope to conduct investigations and summon industry representatives to hearings.

The FxPro Analyst Team