By Medha Singh and Vidya Ranganathan
(Reuters) – A weak start to 2022 and a slew of looming technical and macro headwinds put cryptocurrencies on a rocky path in the coming weeks.
The largest, Bitcoin, has not been able to hold above the $50,000 level since its collapse on December 4 and is down 12% this year.
Far from being a hedge against inflation or alternative non-correlated assets, bitcoin has suffered disproportionately, losing 40% from its November peak as the Federal Reserve and other major central banks made plans to raise interest rates and remove cash. Stimulus.
“There is more correlation than some people might like between the crypto sector and more traditional markets,” said Jack MacDonald, CEO of Standard Custody, a company that handles digital asset custody solutions for institutional investors.
Justin D’Anethan, a cryptocurrency analyst in Hong Kong, points to how the leverage ratio — which tracks open interest across crypto-trading venues compared to bitcoin reserves — has grown despite the liquidation of bitcoin holdings, which could be a sign of more accumulation. Short positions in the currency.
He noted that investors have turned to “offers” even in options.
On the analytics platform CryptoQuant, the leverage ratio of bitcoin across exchanges increased to 0.22 from 0.15 a month ago.
Bitcoin’s market capitalization has fallen to around $793 billion, according to estimates by crypto platform CoinGecko. It has lost about $93 billion since the beginning of this year.
Last week, the Bitcoin Fear & Greed Index of crypto data platform Coinglass reached its lowest level since July 2021, when bitcoin prices were trading at $30K. CryptoCompare researcher said Friday that bitcoin futures on the Chicago Mercantile Exchange saw trading volumes experience the largest monthly decline of 77.4% to $11 billion in December.
Analysts Dalvir Mandara and Bilal Hafeez at research firm Macro Hive cited outflows from cryptocurrency exchange-traded funds (ETFs) and incoming bitcoin’s lower profitability as reasons for the decline.
However, among a mixed set of indicators, they cited slowing growth in open interest in bitcoin, indicating hesitation among investors and a positive funding rate for perpetual futures as a sign that traders are still willing to pay, albeit in low amounts, to maintain on their bitcoins. Long.
Although crypto-related stocks broadly reflected the decline in the price of digital assets, some stocks managed to gain as they announced new projects and offers.
GameStop Corp. shares jumped.
Blockchain infrastructure company BTCS surged more than 44% on January 5 after it announced that it will offer a dividend from bitcoin, called a dividend, to its shareholders of choice.
(Reporting by Medha Singh in Bengaluru and Vidya Ranganathan in Singapore; Editing by Alison Williams)