Bitcoin needs to consolidate above $40K to approve the reversal

Bitcoin soared 4.2% overnight, getting close to the meaningful $40K round level, although there is a $400 retreat from the peaks early on Thursday. Meanwhile, Ethereum strengthened 5.1% overnight and other leading altcoins in the top 10 gained between 4% (Terra) and 14% (Avalanche).

The total capitalisation of the crypto market, according to CoinMarketCap, rose 5% overnight to $1.80 trillion. Bitcoin’s dominance index fell 0.3 percentage points to 41.9%.

The Cryptocurrency Fear and Greed Index was up 6 points to 27 by Thursday and moved up from “extreme fear”. However, it is worth noting that this strengthening hardly fully accounts for the momentum in cryptocurrencies that we saw at the end of Wednesday’s trading day.

Bitcoin rose to its highest level in almost two months amid a sharply weaker dollar and rising stock indices. The US Federal Reserve expectedly raised its rate by 50 points and announced the start of asset sales off the balance sheet. But the extent of the sales initially turned out to be less than expected. The Fed has also rejected a 75-points rate hike at the next meeting, priced in by the markets.

If Bitcoin manages to attract new buyers at levels above $40K by the end of the week, we could see a significant expansion in buyer optimism. Some potential buyers are now waiting for reliable signals to break the downtrend of the last month and a half. Yesterday’s upside momentum took the price above the downtrend line, but a confirmation signal in the form of a rise above the previous local highs is also needed.

According to CoinShares, institutional investors are withdrawing capital from crypto funds in their fourth week. Last week, the net outflow was $120 million, with bitcoin funds facing their most significant capital outflow since June 2021 ($133 million).

The Council of Europe’s Committee of Experts for the Evaluation of Anti-Money Laundering Measures (Moneyval) has called for stricter regulation of cryptocurrencies.

Goldman Sachs Bank made its first-ever bitcoin-backed loan to cryptocurrency exchange Coinbase. Bitcoin miners earned $1.16bn last month, down 4.3% from March.

Cryptocurrencies will become an integral part of any investor’s portfolio over the next few years, according to investment firm Wisdomtree.

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