- Cryptocurrency markets corrected sharply, with large declines in Bitcoin and Ethereum.
- Regulatory concerns, proposed tax burdens, and fears of higher interest rates contributed to Bitcoin’s fall below $20,000.
- Technical analysis suggests Bitcoin may rebound if it establishes a floor at $19,500 and sees daily closes above $20,000-$20,600.
Cryptocurrency markets have had a tough week, and Bitcoin has been the hardest hit. Cryptocurrencies are in their first sharp correction of 2023 after peaking in February, with daily losses in Bitcoin and Ethereum reaching almost 10% before retracing a little.
Cryptocurrency markets, especially Bitcoin, began to sell off following the release of the FOMC Minutes. Fed’s hawkish views’ impact would have remained limited under normal circumstances. But, the Silvergate crisis worsened things, and panic selling ensued as Bitcoin tried to find support in the $23,000 region.
As March began, cryptocurrencies continued to be challenged on multiple fronts. Expectations of higher interest rate hikes rose post Powell’s speech on Fed’s 6-month plan to the Senate Banking Committee this week. This led to a further decline in risk appetite.
In the last 24 hours, certain events led to a significant decline in Bitcoin. The Biden administration proposed the elimination of tax subsidies for cryptocurrency investors in their 2024 budget, which contributed to the largest daily decline of the week for Bitcoin.
Furthermore, the government plans to gradually impose up to a 30% tax on cryptocurrency mining, which is a major concern for the markets. This tax will increase the mining costs in the U.S., one of the most significant regions for cryptocurrency mining. This played a key role in the short-term sell-off in cryptocurrencies.
Regulatory concerns, a sell-off in stocks, fears of higher interest rates, and a proposed tax on electricity used in cryptocurrency mining have all contributed to Bitcoin’s recent fall below $20,000. Yesterday, the New York AG filed a lawsuit against the KuCoin exchange, alleging that it sold unregistered securities and provided services in the state without a license.
The move was the most recent in a series of regulatory crackdowns on the cryptocurrency market in the United States. A key detail in the case was that Ethereum was mentioned as a security for the first time in a lawsuit. In light of all these developments, cryptocurrencies, especially Bitcoin, have taken a big hit.
Bitcoin: Technical View
Bitcoin Daily Chart
Bitcoin easily broke through short-term support this week. Based on the short-term uptrend in February, it fell to the Fibonacci expansion area. Looking at last month’s price action from another perspective, on Feb. 24, Bitcoin broke the symmetrical triangle pattern formed in a downward, high-volume move. This pattern suggests that BTC has completed its bearish momentum as of today, in line with the anticipated decline in the overall bullish momentum.
On the other hand, the fall in Bitcoin to Fib 1,618 may trigger reaction buying. Accordingly, if Bitcoin can establish a floor in the $19,500 area in weekend trading, traders will watch closely for daily closes above the $20,000 – $20,600 area for a possible rebound.
This move could mean BTC has priced in recent events, and a rally towards February’s support zone of $21,600 is likely next week. On the other hand, if the selling continues, BTC could fall below $19,300 to $18,000 and then continue toward the December 2022 bottom zone of $16,500.