Bitcoin bounces back from last week’s low

In the past 24 hours, Bitcoin has been trading mostly flat, just below $30,000, after breaking above $31,000 on Sunday before losing gains. The largest cryptocurrency has continued to trade at lows since the end of 2020 after the market collapsed last week, during which quotes reached $26,000. Bitcoin has lost more than half its value after rising to an all-time high of around $69,000 six months ago.

“As soon as U.S. stock index futures went down since the beginning of trading on Monday, Bitcoin also fell due to its correlation with other risky assets,” said Markus Sotiriou, an analyst at GlobalBlock.

Bitcoin and other cryptocurrencies should in theory trade independently of traditional financial assets, however, they show a significant correlation with other risky assets such as equities, especially tech stocks, which have suffered significantly this year. The S&P 500 is down 16% since the start of the year and the Nasdaq Composite is down 25%, entering bear market territory.

A significant drop in the stock market last week, when the Dow Jones Industrial Average posted its worst six-day performance since 2020, led to a sharp weakening of cryptocurrencies. The sell-off in digital assets was exacerbated by the collapse of two of the top 10 cryptocurrencies, the TerraUSD stablecoin and its associated Luna token.

TerraUSD is a stablecoin whose value is pegged to the US dollar, however, this peg was broken more than a week ago, and on Monday the cryptocurrency was trading in the 8 cents region. Meanwhile, the Luna token has lost almost 100% of its value. The collapse of the two cryptocurrencies led to the loss of market capitalization of approximately $45 billion, and also caused the fall of bitcoin and other tokens.

Other cryptocurrencies have shown similar dynamics to Bitcoin, trading flat on Monday at levels above recent lows, but still deep in bear market territory.

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Ethereum has been hovering around $2,000, having lost one-third of its market capitalization in the last two weeks and had previously dropped to $1,900.

Smaller cryptocurrencies, or “altcoins,” have performed in a similar way. Solana and Cardano fell 1.0%, while Avalanche shed 6.0%. Memcoins, so named because they were created for the purpose of a joke, and not as serious blockchain projects, also showed weak dynamics: Dogecoin fell by 2.0%, and Shiba Inu fell by 3.0%. .

There are signs that investors are still expecting cryptocurrencies to fall. According to continuous data on Bitcoin futures, the funding rate on these contracts remains negative, signaling the prevalence of short positions in the cryptocurrency in the derivatives market.

The current situation leaves the largest cryptocurrency room for growth in the event of even a small rally.

Most traders in the futures market have short positions at a key support level and may be forced to exit when bitcoin rises, pushing the price even further higher, Sotiriou said.

Сувенирные монеты с логотипами криптовалюты биткоин
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