On February 17, Bitcoin was close to the upper limit of the narrow range of $42k–$44.5k fluctuations. The price was pressed for the whole week, but as a result, the exit outside the area took place in a downward direction. As a result, the asset has fallen in price by 5% over the past day and pulled the rest of the coins with it. As a result, the total capitalization of the crypto market decreased by 4%, to $1.87 trillion.
What happened?
It would be wrong to blame everything on Bitcoin, given the general tense situation in the world, which is reflected in all markets, including cryptocurrency. Under such conditions, the sluggish attempt of the bulls to break the wedge up looked obviously losing. Sellers stepped up as the price approached the $45k mark. The selling cascade eventually brought the price down to the $40k support level.
As a result, the cryptocurrency moved into a wider range of $40k–$44k. Technical indicators indicate weak support for buyers: the stochastic oscillator left the bullish zone with a sharp downward impulse, which indicates strong positions for sellers. At the same time, the RSI started to recover, which indicates protection of the $40k level. But with such buying activity, you can count on a long consolidation flat from bitcoin in the near future.
Possible reasons
As bitcoin was recognized as a class asset, its dependence on the US dollar began to increase. This provoked a painful perception by the market of all the decisions of the Fed. On February 17, it became known that the report following the Fed meeting at the end of January said that cryptocurrencies are a threat to financial stability.
Fed members noted that, combined with increased volatility, the capitalization of the cryptocurrency market has a negative impact on other sectors of the economy. Considering that the last time the regulator mentioned cryptocurrencies was in the summer of 2021, Powell's policy will be largely aimed at stabilizing the cryptocurrency industry.
The second important reason for the possible decline of Bitcoin and the cryptocurrency market was its co-dependence on stock indices. SPX and NASDAQ also posted sharp declines on February 17. At the same time, gold has updated its local maximum and remains around $2.8k. The combination of these facts may indicate increased fear of investors against the background of the aggravation of the situation in Eastern Europe, where the likelihood of an escalation of the conflict is still high. Participants do not want to take action and intend to save their capital against the backdrop of global tension, so they buy gold.
What will happen next?
Nothing critical has happened and the cryptocurrency market will begin to recover to local support zones. I assume a sideways movement on all major assets with a gradual consolidation above key local levels. At the same time, it should be taken into account that the fundamental background may provoke investors to make another active withdrawal of funds from high-risk assets. As of February 18, there is no intelligible dynamics of the movement of the cryptocurrency market, stagnation occurs, and therefore it is necessary to consider all options, including a likely decline to local lows.
