Bitcoin price leaps 4% but is the leading crypto due for a big retrace?

Man sitting at a desk facing his computer screen and holding a coin representing discussion by the RBA Governor about cryptocurrency and digital tokens

Man sitting at a desk facing his computer screen and holding a coin representing discussion by the RBA Governor about cryptocurrency and digital tokens

The Bitcoin (CRYPTO: BTC) price is charging ahead, up 3.8% over the past 24 hours.

One Bitcoin is currently worth US$40,526 (AU$56,365).

That gives the world’s original crypto a market cap just north of US$770 billion, according to data from CoinMarketCap.

Why the big leap higher?

The Bitcoin price looks to be following the lead of US tech shares, which rebounded yesterday (overnight Aussie time) to send the Nasdaq up 1.3%.

Despite the overnight bump, Bitcoin remains down 15.8% in 2022, just edging out the 17.8% year-to-date loss posted by the tech-heavy Nasdaq.

And while crypto investors may be cheering the 3.8% boost in their holdings (valued in US dollars), some analysts are predicting the digital token could be looking at a 19% or more slide from current prices.

What analysts are saying about the Bitcoin price

In a note released prior to today’s 3.8% lift in the Bitcoin price, Mark Newton, a technical strategist at Fundstrat, said (quoted by Bloomberg), “Bitcoin looks to be breaking a pivotal minor two-month trend on Friday’s pullback that likely causes weakness down to test January lows.”

Newton forecasts the Bitcoin price will retrace to US$36,300. If it falls below that price, he said this “should lead to a full retest of US$32,950 without too much trouble”.

A major potential headwind for the Bitcoin price is the outlook for interest rates. While the RBA may hold off for another month or two, the US Federal Reserve has no such intentions, with numerous 0.50% rate hikes expected in the months ahead.

According to analysts at Nydig:

As it becomes more valuable to hold dollars, some investors may reallocate from Bitcoin or gold to the dollar. Like the negative correlation of Bitcoin to the dollar, the negative correlation of Bitcoin to real rates has only emerged in the last couple of years.”

Commenting on why the Bitcoin has been languishing in a trading range largely between US$35,000 and US$45,000 this year, James Malcolm, head of crypto research at UBS said (quoted by Bloomberg), “The vast majority of the population seem to have little interest in crypto because it’s too complicated, too volatile, too strange. So in a sense, we’re stuck at the moment.”

So, how does the Bitcoin price get out of its trading rut?

“It either needs new people or it needs existing players to dedicate an increasingly large slice of resources to the industry,” Malcolm said.

The post Bitcoin price leaps 4% but is the leading crypto due for a big retrace? appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Bitcoin. The Motley Fool Australia owns and has recommended Bitcoin. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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