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A double top could be forming for Bitcoin at US$24k

A double top could be forming at Bitcoin current price.

February 24, 2023 - Bitcoin seems to be in an accumulation phase hovering around the US$24k price level. Some technical analysts are pointing out the formation of a double top connecting the current price level with the previous time the cryptocurrency reached it in Aug/2022. They argue that if the price is not able to break the US$25k level, remaining above it for a while, Bitcoin could face a massive sell-off through the lows of the year. On the other hand, there is not much resistance above US$25k, which could lead the major cryptocurrency to test the US$28-30k price range. Moreover, Bitcoin futures are underscoring this bullish momentum with a 10-day streak of positive funding rates. In our view, for now, the odds seem skewed to the bull side, but we may have been fooled by a large liquidity injection in the market recently.

Despite the Fed's efforts to shrink its balance sheet, other central banks have net added US$1 trillion of liquidity into the global economy since Oct/2022. The Bank of Japan (BOJ) and People’s Bank of China (PBOC) were among the largest contributors, and part of this liquidity may have found its way to the crypto market. Therefore, a reversal of such large liquidity injections could pose a risk to Bitcoin’s year-to-date resilient performance, in our view. On top of that, the risk of higher US inflation, which could make the Fed change its current rate hiking deceleration narrative, and new regulatory developments, could haunt the crypto market.

The SEC chairman Gary Gensler implied, in a recent interview with New York Magazine, that he believes Ethereum could be a security. Although this is not the first time Gensler presents his view that besides Bitcoin all other cryptoassets are securities, this comment comes after the recent wave of the SEC’s crackdowns against staking services and stablecoins. Thus, it is a little bit disturbing to picture a new attack against the second largest cryptocurrency from the agency in the wake of Ethereum’s Shanghai Upgrade. This upgrade is a significant change to Ethereum’s proof-of-stake system, increasing the popularity of ETH staking. An attack from the SEC against ETH staking could be harsh to the crypto market, though we believe the US regulator is aware of the damage it could cause, thus, we would expect it to act with caution.

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