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Bitcoin, which had been trending downwards for the most part of last week dipped below US$46,000 yesterday and is now a full third off its all-time-high clocked in early November.
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Whereas bitcoin may have stared the year with 70% dominance, it has since seen that lead dwindle to just 40%.
With less than two weeks left before the end of 2021, bitcoin lies in the Goldilocks zone, not quite at the bullish forecasts of US$100,000, but also nowhere close to zero or capitulation, despite waning risk sentiment.
Global financial markets are being whipsawed by a variety of factors, from tightening monetary policy, to evidence that the omicron coronavirus variant is both more virulent and potentially just as deadly as any other mutation before it.
Against this backdrop, bitcoin, which had been trending downwards for the most part of last week dipped below US$46,000 yesterday and is now a full third off its all-time-high clocked in early November.
Policymakers are prioritizing the fight against inflation by tightening monetary conditions despite signs that the omicron variant could derail the economic recovery.
Making matters worse, Democratic Senator Joe Manchin has put the kybosh on the Biden administration’s US$1.75 trillion spending bill, which might have fed into risk sentiment with fiscal stimulus just as monetary stimulus threatens to be withdrawn.
The volatility and risk-off sentiment is forcing investors to take a long hard look at whether risk assets from cryptocurrencies to technology shares may be due for a rougher patch after surging from pandemic lows.
But there are also some technical factors for chart watchers which could portend a change of fortune for bitcoin, with the benchmark cryptocurrency sitting at its 55-week moving average, a level which bitcoin has typically bounced higher from in the past.
And regardless of sentiment, cryptocurrencies as a whole can pat themselves on the back for a breakout year which saw some US$1.5 trillion in market cap added.
Despite the correction from its all-time-high, bitcoin is still up over 60% this year and its share of total market cap has fallen dramatically, suggesting that investors are looking beyond the basic bitcoin to bolster their cryptocurrency portfolios.
Whereas bitcoin may have stared the year with 70% dominance, it has since seen that lead dwindle to just 40%.
