The price of Bitcoin (BTC) trending lower to $57,000 is still an extension of the taproot upgrade that saw traders take profits recently.
An 18% pullback has already happened two times earlier this year, but each time Bitcoin came roaring back.
A clear uptrend on the chart means the price of Bitcoin is making higher highs and higher lows reinforcing that Bitcoin is still forcing itself in an upward direction.
So this isn’t that big of a deal in the bigger scheme of things.
Bitcoin, by its very nature, is a highly volatile asset to begin with, so we will see wild upswings and cruel selloffs.
In fact, bullish corrections are indicative of healthy behavior.
Many need to understand that Bitcoin won’t just go up in a straight line even if they want it to.
What’s more interesting is that even though Bitcoin has had a tough time lately, altcoin capital flow has been highly encouraging.
Various altcoins have done well this year with Ethereum (ETH) returning 600%, Solano (SOL) up 9,300%, and Cardano (ADA) up 1,050%, and these are just a few.
Many more have had great degrees of success.
What we are seeing is bitcoin starting to somewhat mature even if it is still in the early innings.
However, many of these altcoins are still at the top of the 1st inning and the lunging growth can be found at the inception of its growth phase.
Broad-based strength of secondary coins was just a pipedream a few years ago, even Bitcoin was a suspicious word, yet the participation of a wider swath of cryptocurrencies means that money which would have been earmarked for Bitcoin a few years ago has now gone into more obscure coins looking for a quick 10X bagger.
I still do believe there will be major buyers in the upper $50,000 levels unless a black swan really tanks crypto.
Another reason for the retracement of Bitcoin is the US dollar (UUP) rally that has taken many by surprise.
Traditional markets indicate potential for a deeper drawdown. The reappointment of Jerome Powell as Chairman of the Federal will get a lot of Fed speak for controlling inflation even if rates won’t go up soon.
The US dollar has been on fire with it strengthening across all currencies and even though Bitcoin is a digital currency, it’s still fighting for the same capital flow as the US dollar.
It’s plausible that Bitcoin traders with big profits, are skimming off profits and reducing their crypto positions, and spinning them into US dollar funds to take advantage of the more than bullish momentum.
The pullbacks in parts of the emerging world have been quite stark with the Turkish Lira falling as much as 15%, even in safer financial waters of Poland, the Polish Zloty is down 5%.
The last bit that could incite negative sentiment for investors is fears that creditors of the defunct Mt Gox exchange could finally liquidate their payments – seven years after the cryptocurrency exchange collapsed.
Trustee Nobuaki Kobayashi confirmed last week that 141,000 BTC ($8 billion) under custody would soon be distributed among those impacted by the Mt Gox fiasco.
Mt Gox coins represent more than 3% of the 4.2m bitcoins in constant circulation. If all of them were to be cashed in at once it would cause the price to crash, at least over the short term.
If these losses are to happen, it wouldn’t translate into a longer-term bear market, but it will deepen the current correction and delay the dip-buying.
I am still encouraged about bitcoin’s direction and the continued spread of adoption has been a massive feather in the cap for this asset.
Major corporations like Tesla and MicroStrategy continue to pour cash reserves into bitcoin, while several countries look set to join El Salvador by introducing bitcoin as legal tender.
I do believe that 2022 will generate a bountiful array of bitcoin and crypto bullish events in a year where stocks will have a hard time replicating the same gains as this year.
