By Samuel Indyk
Investing.com – Bitcoin was trading below $47,000 on Wednesday as cryptocurrencies look set to end the year with a whimper. The world’s largest cryptocurrency by market cap remains around 30% below its all-time high hit in November but is still higher by around 65% year-to-date. The cryptocurrency is down around 17.5% in December and is heading for its worst month since May when it fell over 35%.
Other major cryptocurrencies were showing similar price action with Ethereum down around 4% in the last 24 hours, trading near $3,750. Other cryptocurrencies linked to Decentralised Finance (DeFi) were also falling, with Solana down around 10% and Cardano down 9% in the last 24 hours.
There was no single catalyst for the decline in cryptocurrencies, but the focus remains on the impending removal of central bank stimulus that has helped push cryptocurrencies higher over the last 12 months.
The Federal Reserve has quickened the pace of its tapering of asset purchases, while the ECB has announced its pandemic emergency purchase programme will be coming to an end next year. The Bank of England somewhat surprised markets earlier this month when they voted to increase the interest rate for the first time since August 2018.
The highly speculative nature of Bitcoin and other cryptocurrencies means that as central banks remove the punchbowl, the digital assets could be shunned by investors for historically more stable and safer assets.
On the recent decline, Bitcoin has dropped below the 21-day moving average around $48,500 and back below the 200-day moving average near $47,750.
The 50-day moving average has now also crossed below the 100-day moving average. When a shorter-term moving average crosses below a longer term moving average it is known as a ‘death cross’ and is often a signal of a bearish trend. However, the more common moving averages used to signal a ‘death cross’ are the 50-day moving average and the 200-day moving average.
To the downside, support is seen around $45,500 which was the mid-December low. Below that level, the flash crash low from 4th December near $42,600 could also act as support.
On the upside, the 200- and 21-day moving averages (mentioned above) could now act as resistance.
Bitcoin declines as December struggle continues for cryptocurrencies
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