Bitcoin Price Falls to 3-Month Low. Has It Fallen Too Fast?

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Bitcoin
declined to three-month lows on Friday as minutes of the latest Federal Reserve meeting raised the possibility the central bank could boost interest rates as soon as March.

Bitcoin closed at $41,907.50 at 5 p.m. Friday, down 2.8% over the past 24 hours, according to CoinDesk. The world’s largest cryptocurrency fell to as low as $40,745, hitting the lowest levels since September, CoinDesk reported. Bitcoin’s record high is $68,990.90.

Analysts at Fundstrat said in a note that near-term technical and cycles for cryptocurrencies remain bearish, “and suggest further weakness might unfold into this Spring before any meaningful low is at hand.”

The analysts said key short-term support for Bitcoin is estimated at around $39,500, and then $29,000 “being more serious, as this held from May through July 2021.”

Jeffrey Halley, an analyst at broker Oanda, said a weekly close for Bitcoin below $42,400 would be a negative technical signal, but he added that $40.500 and $39,500 are the “real levels to watch.” 

Halley said he believes Bitcoin’s selloff “has come too far, too fast.” 

Bitcoin’s tumble followed the release on Wednesday of the Federal Reserve meeting minutes, which indicated that inflation readings and tight labor conditions could warrant an interest-rate increase “sooner or at a faster pace than participants had earlier anticipated.” The central bank also hinted at a potential reduction of its $9 trillion balance sheet. 

Ethereum,
the second-largest digital currency, declined 6.1% over the past 24 hours to $3,216.50.

Write to Joe Woelfel at [email protected]