(WEEKLY NOTION): BTC/USD, ETH/USD, XLM/USD Takes a Tumble, How Low Will They Go? Next Mover: Potential Regulation of Cryptocurrencies

BTC/USD (as of Jan 22, 2021, 11.50 a.m., GMT +8)

Source: Yahoo Finance

ETH/USD (as of Jan 22, 2021, 12.20 p.m., GMT +8)

Source: Yahoo Finance

XLM/USD (as of Jan 22, 2021, 11.55 a.m., GMT +8)

Source: Yahoo Finance

This week saw some fund outflows out of cryptocurrency. CoinShares reported $85 million in outflows from institutional investors who are most likely to be taking profits as Bitcoin consolidates. There was also $3 million outflows from Ethereum derived investment. The report also highlighted that as the USD index is typically correlated to Bitcoin prices, this could explain the outflows as investors take profit. However, it is also reported that institutional inflows are strong at $359 million, with 99% of total capital flows are into Bitcoin. 

Here’s a snapshot of how the week was for BTC/USD, ETH/USD, and XLM/USD:

BTC/USD

A key event for BTC/USD this week was its 7.4% decline in the early hours of Jan 20. The price fell from $37,800 and $35,000, and with it liquidating $572 million worth of cryptocurrency future positions. A similar trend was observed in the early hours of Jan 21, when the price fell from $35,666.05 to $34,321.74. Analyst Joseph Young from Coin Telegraph believes that the first pullback is due to an overheated derivatives market, growing doubt in the market, and a lack of upside volatility. 

On the early hours of Friday, BTC/USD fell more than 5% to a low of $28,800. This would be the sharpest weekly drop since Mar 2020 and it has lost 15% so far this week. At the time of writing, BTC/USD is at $30,697.37.  

Reuters reported that the downward trend can be attributed over potential tightening regulation around cryptocurrencies, especially following comments from European Central Bank’s president Christine Lagarde who called for global regulation of Bitcoin. A similar sentiment came from Janet Yellen, President Joe Biden’s nominee for U.S. Treasury Secretary, who also suggested that lawmakers curtail the use of Bitcoin, on grounds that it could be used for illicit financing. However, strategist Michael McCarthy from CMC Markets in Sydney believes that a correction is normal after a historic bull run of 700% above the 2020 low of $3,850. 

Analyst John Isige from FX Street reported that Grayscale, the largest digital asset management firm, and a recent fan of Bitcoin, bought more than 8,000 Bitcoin during its present dip. Grayscale is not the only one buying in this dip. Black Rock, the largest money manager, is also getting ready to add Bitcoin futures. 

ETH/USD

Although ETH/USD had a good start to the week by climbing above $1,400, the price began declining in the middle of the week to slightly below $1,250 on Jan 20. Analyst Lorenzo Stroe from FX Street believes that this dip was contributed by Ethereum miners taking some profit, which was evidenced by their balances dipping below one million ETH for the first time since it hit $1,000. However, he also reported that the whales are not selling yet. 

He believes that should miners continue to panic-sell as the price falls further, the bulls should be concerned. He opines that a crucial support level rests at $1,183. If this is broken, the bears could take control. 

However, as BTC/USD took a tumble in the early hours of Friday, ETH/USD followed suit. The price dropped 31% to $1,051.54, which is its largest percentage loss since Mar 12, 2020. This has reduced Ethereum’s market cap to $123.1 billion or 14.2% of the total cryptocurrency market cap. At the time of writing, the price is at $1,147.99. Analyst Yohay Elam from FX Street believes that the critical level to watch now would be $1,060 and $905. 

XLM/USD

On Jan 19, the price of XLM/USD began plummeting from $0.3174. This came after XLM/USD trading sideways for the past two weeks after a significant rally to $0.411, awaiting a clear breakout or breakdown. Analyst Crispus Nyaga from Investing Cube reports that the price as of Jan 20 is at the same level as the 15-day and 25-day exponential moving averages (EMA). He also reports that traders should keep an eye for support and resistance levels at $0.26 and $0.32, respectively. 

Unfortunately, as BTC/USD took a tumble on Jan 22, XLM/USD also experienced a sharp fall from $0.2574 to $0.2294. At the time of writing, XLM/USD is at $0.2559. 

CONCLUSION 

Overall, the world of cryptocurrencies is beginning to experience slight tremors as key names in financial regulation such as Christine Lagarde and Janet Yellen are calling out for tighter regulations. If the bulls can hold the fort in the midst of these tremors, there could be brighter days ahead here. 

FOLLOWME BTC/USD Overall User Sentiment (as of Jan 22, 2021 at 12.05 p.m.)

Short – 45.95%

Long – 54.05%

BTC/USD (as of Jan 22, 2021, 11.50 a.m., GMT +8) - $ 30,697.37

ETH/USD (as of Jan 22, 2021, 11.50 a.m., GMT +8) - $ 1,152.92

XLM/USD (as of Jan 22, 2021, 11.55 a.m., GMT +8) - $ 0.2559