Bitcoin Declines as Crypto Traders Take Profits. How Far Prices May Fall.


Bitcoin

and other cryptocurrencies slipped on Monday amid signs that more traders are taking profits after a recent rally in digital assets. While prices could still fall further, cryptos continue to benefit from multiple factors.

The price of Bitcoin has fallen 2% over the past 24 hours to below $41,000, around its lowest level in two weeks and marking a further retreat from recent 20-month highs above $44,000. The largest digital asset has rallied by some 50% in two months, spurring calls of a new crypto bull market and ending a multi-month stretch of subdued trading.

“Bitcoin market structure remains strong with a top close to $45,000. For Bitcoin to take a breather and define a new range can be seen as a healthy sign,” said Anthony Rousseau, head of brokerage solutions at broker TradeStation. “It’s possible we have the perfect storm brewing for a strong 2024.”

Indeed, crypto bulls are still eyeing more gains, with jockeying in the options market revealing that it remains a popular bet that Bitcoin will hit $50,000 in the coming weeks.

Digital assets have benefited from a number of positive factors, including expectations that U.S. regulators will soon approve the first spot Bitcoin exchange-traded fund (ETF), ushering in a fresh wave of investor interest. Historically tight token supply and the macroeconomic backdrop also have helped, with Bitcoin rallying in step with the

Dow Jones Industrial Average

and

S&P 500

amid hopes that the Federal Reserve will cut interest rates multiple times next year.

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But there are now signs that some crypto traders are taking profits, though indicators still point to much of Bitcoin’s token supply being held by stubborn long-term investors. Digital asset investment products snapped an 11-week run of inflows, analysts at digital asset manager

CoinShares

wrote in a note Monday. Minor outflows of $16 million, concentrated in Bitcoin products and seen across a mix of regions, “suggest this was more related to profit-taking rather than a turn in sentiment towards the asset class,” the analysts wrote.

With continued selling pressure from profit-taking, Bitcoin’s technical market backdrop appears to be weakening, and prices look vulnerable to falling further.

“We may be seeing profit-taking from all the upside from the October lows. Working off this scenario suggests a pullback to the $38,000 area if the market falls below $40,000,” said Alex Kuptsikevich, an analyst at broker FxPro. “But even this potentially nasty drawdown looks to be just part of a larger bull cycle that Bitcoin is now moving within.”

Beyond Bitcoin,

Ether

—the second-largest crypto—lost 4% to $2,130. Smaller tokens or altcoins were even weaker, with

Cardano

down 7% and

Polygon

plunging 8%. Memecoins were similarly in the red, with

Dogecoin

dropping 7% and

Shiba Inu

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shedding 9%.

Write to Jack Denton at jack.denton@barrons.com



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