Bitcoin’s fading bounce is sowing caution about its outlook.
The token has shed about 5% over two days, retreating further from $30 000 and contributing to a $50 billion drop in overall crypto market value. A year-to-date Bitcoin jump that reached 84% in mid-April has cooled to 67%.
The highest notional values for Bitcoin options contracts expiring in May through September now point to a $22 000 to $32 000 price range, whereas the ceiling was around $38 000 to $40 000 a week ago, Deribit data show.
The largest digital asset was little changed at $27 585 as of 8:30 a.m. Tuesday in London. Smaller tokens such as Ether and Solana also posted small moves.
Aside from a more circumspect outlook in the options market, recent gyrations in Bitcoin’s price are tracing a head-and-shoulders pattern. For some technical analysts that increases the risk of a further pull back in the token.
Bitcoin has been under pressure after a spate of transactions involving meme tokens on its network, such as Pepe, caused a spike in congestion and transaction fees. The jump in cost led crypto exchange Binance to temporarily halt Bitcoin withdrawals, sapping sentiment.
Blockchain data show pending transactions on the Bitcoin network remain elevated at more than 400 000. The mean fee per transaction jumped to almost $31 on Monday from 60 US cents at the start of 2023, according to CryptoQuant.
“For the global crypto market cap to make a serious run higher, these meme coins can’t be attracting this much attention,” Edward Moya, senior market analyst with Oanda Corp, wrote in a note.
An uncertain outlook for interest rates could also be storing up crypto volatility as traders try to work out whether policy settings will stay tight to fight inflation or be loosened in the wake of banking-sector woes.
Bitcoin has partially rebounded from a crypto crash last year that contributed to the collapse of the FTX exchange but remains about $41 000 down from its 2021 record of nearly $69 000.
© 2023 Bloomberg
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