Bitcoin reversed its overnight rise to $94,000, falling back to $92,000 during U.S. opening hours on Thursday, continuing choppy action after wild moves first fell and then rose earlier in the week.
Ethereum Ether held up relatively well, down just 0.7% on the day and rising above $3,100 in the afternoon. Among altcoins, Hedera (HBAR), and privacy-focused Zcash led the decline with declines of 4-5%, while the market-wide CoinDesk 20 Index was down 2%.
Hectic exchanges to come
Despite the pullback, BTC continues to hold well above the support level established around $85,000 earlier this week, suggesting that markets could settle into a holding trend as liquidity dwindles as the end of the year approaches, Paul Howard, senior director at trading firm Wincent, said in a note.
“We continue to see a strong correlation between cryptocurrency prices and global macroeconomic events,” said Paul Howard, senior director at Wincent. “Although December is typically a month of low liquidity, we observe that a higher floor has been set over the past seven days around the $85,000 level.”
Without any new major macroeconomic headlines, Howard expects more limited trading between $85,000 and $95,000 for the rest of the month. “There is potential for outperformance of altcoins, which generally perform well in a low liquidity, high volatility environment,” he added.
All eyes are on Japan
On the macroeconomic front, markets enter December with their eyes on the US Federal Reserve and, more importantly, the Bank of Japan (BoJ).
According to Mark Connors, founder and chief macro strategist at investment consultancy Bitcoin Risk Dimensions, the BoJ’s rate decision is this month’s “key event” because it determines the future of the yen-funded carry trade, a strategy in which investors borrow in yen to purchase higher-yielding assets.
If the BoJ keeps rates steady, as Connors expects, it could reignite demand for risky assets and provide a tailwind for stocks, bitcoin and gold.
