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BTC gets wings clipped

Bitcoin fell 13.76% to $49,396 over the week ended December 3. Price action tanked 26% to $42k. Buyers managed to pare some losses by the close of the weekly candle.

The trigger for Saturday’s rout was a mixed NFP report and strong non-manufacturing PMI data stateside for November. Investors expect the Fed to double the QE taper to $30 bln per month. By the end of Friday, BTC plunged 10.2%, and Ether 13%. Another reason for the flash crash could be resistance from US regulatory authorities.

SEC CEO Garry Gensler said during the DACOM 2021 summit that Bitcoin is a competitor to the US banking system. Regulators want to take control of the cryptocurrency, which means they will tighten the screws.

On Saturday, December 4, sellers triggered stop losses on margin positions. Total liquidations of long BTC positions topped $763 mln. BTC’s dominance of the crypto market decreased to 40.21%. The rate currently stands at 41.53%.

Bitcoin was down 2.43%, trading at $48,280 by the time of writing on Monday, December 6. Resistance is located at $49,700. Market turmoil can be expected to continue until December 21. Below we list a number of factors that will exert an impact on the cryptocurrency market:

1. Shares of Chinese developer Evergrande have collapsed. The company’s 3o-day grace period for coupon payments expired and now it has to repay liabilities totaling $82.5 mln. There are no guarantees of repayment. This issue has a negative impact on risk-sensitive assets.

2. The US House of Representatives on December 8 will host a hearing on "Digital Assets and the Future of Finance: Understanding the Challenges and Benefits of Financial Innovation." The hearing will be attended by representatives of the cryptoindustry.

3. The FOMC will hold its next meeting on December 14-15. The regulator is expected to boost the scope of QE tapering from $15 bln to $30 bln. This issue has a negative impact on risk assets and is positive for the US dollar.

4. Some states may be unable to meet their financial obligations as soon as December 21 unless Congress raises the public debt ceiling by that time. The media will scare investors with the prospect of a US default.

5. The coronavirus outlook remains tense. Within a week, experts should weigh in on how dangerous the Omicron strain is and what the odds of new lockdowns are.

Bitcoin is expected to continue trading sideways on Monday, December 6, in the range of $46,300-$50k.

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