Macro and technical headwinds accrue for bitcoin

BTCS

10/01/2022 17:24

By Medha Singh and Vidya Ranganathan
    Jan 10 (Reuters) - A weak start to 2022 and a host of
looming macro and technical headwinds are setting
cryptocurrencies up for a rough ride in the weeks to come.
    The biggest of them, bitcoin  BTC=BTSP , has not managed to
hold above the $50,000 mark since its Dec. 4 crash and is down
12% this year. 
    Far from being the hedge against inflation or the
uncorrelated alternative asset it was sometimes plugged as,
bitcoin has suffered disproportionately, losing 40% from its
peak in November, as the Federal Reserve and other major central
banks spelt out plans to raise rates and remove monetary
stimulus.
    "There's more correlation than some people might like
between the crypto sector and the more traditional markets,"
said Jack McDonald, chief executive officer of Standard Custody,
a firm handling digital asset custody solutions for
institutional investors.
    Justin D'Anethan, a Hong Kong-based cryptocurrency analyst,
points to how the leverage ratio -- which tracks the open
interest across cryptocurrency trading venues relative to
bitcoin currency reserves -- has been growing despite the
liquidation of bitcoin holdings, which could be a sign of more
short positions being accumulated in the currency. 
    Investors had turned to favouring "puts" even in options, he
noted. 
    On analytics platform CryptoQuant, the bitcoin leverage
ratio across exchanges has risen to 0.22 from 0.15 a month ago.
    Bitcoin's market capitalisation has dropped to around $793
billion, crypto platform CoinGecko estimated. It has lost about
$93 billion since the start of this year.
    Crypto data platform Coinglass's bitcoin Fear & Greed index
last week touched its lowest level since July 2021, when bitcoin
prices were trading at $30,000. Bitcoin futures on the CME saw
volumes record the biggest monthly fall of 77.4% to $11 billion
in December, researcher CryptoCompare said on Friday.
    Analysts Dalvir Mandara and Bilal Hafeez at research firm
Macro Hive pointed to outflows from cryptocurrency
exchange-traded funds and the reduced profitability of incoming
bitcoin as reasons to be bearish. 
    Yet, among a mixed bag of indicators, they pointed to the
slowing growth in bitcoin open interest as suggesting hesitation
among investors and a positive funding rate for perpetual
futures as a sign traders are still willing to pay, albeit low
amounts, to keep their bitcoin longs.
    Even as stocks linked to cryptocurrencies broadly mirrored 
the fall in prices of digital assets, a few stocks managed gains
as they announced new ventures and offerings.
    Shares of meme stock GameStop Corp  GME.N  jumped 7% on
Friday on plans to launch a division to develop a marketplace
for NFTs and establish cryptocurrency partnerships.  urn:newsml:reuters.com:*:nL4N2TM3BM
    Blockchain infrastructure firm BTCS  BTCS.O  surged over 44%
on Jan. 5 after announcing it would offer bitcoin dividends,
called bividends, to its shareholders who choose to opt for it.
 urn:newsml:reuters.com:*:nL4N2TL2Z4

 (Reporting by Medha Singh in Bengaluru and Vidya Ranganathan in
Singapore; Editing by Alison Williams)
 ((Medha.Singh@thomsonreuters.com; within U.S. +1646 223 8780,
outside U.S. +91 80 6182 2802; Twitter: https://twitter.com/medhasinghs;))