Bitcoin Extends Losses Following Massive Correction; Traders Keeping Tabs on the Fed

Bitcoin extended its slide on Friday, capping off one of the worst two-day stretches since November and raising renewed awareness about the possibility of new lows over the horizon.

Correction Deepens

Bitcoin printed a session low of $3,598.49, according to CCN’s price tracker. It has since recovered near $3,668, where it was down 4% compared with Thursday. The following chart, courtesy of CoinMarketCap, shows price action over the past 24 hours.

In terms of individual exchanges, BTC/USD traded as low as $3,613 on HitBTC and as high as $3,720 on Bitfinex. Trade volumes on virtual currency exchanges surged on Thursday and remain above $6 billion on a 24-hour basis.

Bitcoin’s rapid selloff on Thursday, which amounted to 9%, triggered an even bigger fall in alternative coins and tokens. As a result, bitcoin’s share of the overall cryptocurrency market strengthened to 52.6%, the highest in two weeks.

The leading digital currency faces immediate support near $3,500-$3,550, a historically significant region. A bounce off this level could pave the way for a bullish correction in relatively short order. A bigger pullback below $3,500 would bring last month’s low back into consideration.

Some of bitcoin’s most ardent supporters, including Morgan Creek Digital’s
Anthony Pompliano, believe further losses are likely before a sustained rally takes root. This means a brief drop below $3,000 is still very much in the cards. The BTC price bottomed right around $3,100 in December following a devastating month-long correction.

Keeping Tabs on the Fed

On Thursday, we speculated that the actions of the Federal Reserve could be influencing cryptocurrency investments. Fed speakers have successfully talked down expectations of rising interest rates, which has helped fuel a large recovery in stock values. Since falling into bear-market territory on Christmas Eve, the S&P 500 and Nasdaq have each recovered more than 10%.

The end of quantitative easing and subsequent rise in interest rates are expected to place downward pressure on equity markets as the era of ultra-cheap money comes to an end. This so-called quantitative tightening could have a similar impact on the cryptocurrency ecosystem, especially if the transition from retail investor to institutional investor takes root.

More on this story: Crypto Winter and the Fed?

Retail traders were the primary catalyst for the 2017 crypto boom, but their participation in the market has dwindled ever since. This can be gauged by observing things like Google search trends, new account creation and overall trading volume on virtual currency exchanges. Against this backdrop, it has been hypothesized that the next crypto bull market will be initiated by the institutions.

Two of the world’s biggest exchange operators are set to launch new bitcoin markets this year, while fund managers are still vying for the first U.S.-regulated crypto exchange-traded fund. Both developments could have major implications on institutional interest moving forward.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi