Bitcoin declined today after a brief surge on Tuesday. At the time of writing, BTC was trading at $26,731 after sliding down from its recent high of $27,434 within the past 24 hours.
Tuesday witnessed a bullish sentiment in the cryptocurrency market, as Bitcoin recorded a modest 0.93% price increase, closing the day at $26,869. This positive momentum also spilled over to other 10 largest cryptocurrencies by market capitalization, with several of them posting gains.
However, Wednesday's downturn can be attributed to the prevailing pessimism in the US stock market on Tuesday. The Dow Jones Industrial Average declined by 0.69%, while the S&P 500 and the NASDAQ Composite recorded losses of 1.12% and 1.26%, respectively.
It is worth noting that the correlation between cryptocurrency and traditional stock markets has diminished over the past year, as Bitcoin has remained in a sideways channel. Experts from Bernstein, an American investment company, highlighted this trend back in February, reporting that correlation between Bitcoin and the NASDAQ Composite index dropped from 0.94 to 0.58.
Bernstein analysts suggest that the cryptocurrency market has been oscillating between bullish and bearish sentiments while awaiting significant driving factors. However, its sensitivity to major financial news and events has notably decreased.
In early 2022, analysts often emphasized the strong correlation between the US stock market and the cryptocurrency market, driven by geopolitical tensions in Eastern Europe and the Federal Reserve's actions. Last year, Arcane Research, an investment company, noted that the correlation between BTC and technology stocks reached its peak since July 2020.
TradingView economists claimed that the fourth quarter of 2022 witnessed a 70% correlation between the cryptocurrency market and the US stock market.
Altcoin market
In line with Bitcoin's decline, Ethereum, the primary competitor to BTC, also slumped today. Ethereum was trading at $1,817 at the time of writing, declining from its previous closing price of $1,815. Analysts are closely watching whether Ethereum will drop below the key support level of $1,600 or break above $1,950 to determine its future price trend.
Among the top 10 cryptocurrencies by market capitalization, Dogecoin (-2.11%) demonstrated the poorest performance within the past 24 hours.
Over the past week, Solana (-5.56%) experienced the largest decline among the top 10 cryptocurrencies, while Polygon (+2.64%) recorded the largest gains.
Market capitalization and expert predictions
According to CoinGecko, the total crypto market cap exceeded the significant milestone of $1 trillion, reaching $1.08 trillion as of today. However, it declined by 1.84% within the past 24 hours.
Since exceeding $3 trillion in 2021, the cryptocurrency market lost nearly $2 trillion in market capitalization.
Looking ahead, most cryptocurrency analysts remain cautiously optimistic, expecting stability and giving a positive outlook for Bitcoin in the short term. They anticipate BTC to remain within a price range between $27,000 and $28,500 in the near future.
Bitcoin has the potential to overcome its bearish trend, experts say, but the cryptocurrency will require strong driving factors that are currently lacking in the markets.
YouTube analyst Jason Pizzino holds an more positive outlook, stating that even adverse market events will not be able to halt the rally of BTC. He predicts that the coin will soon find itself in the range between $32,000 and $42,000.
This sentiment is echoed by Arthur Hayes, the founder of BitMEX cryptocurrency exchange, who remains confident that regardless of the financial path chosen by the Federal Reserve and US authorities, BTC will move higher. According to Hayes, this ascent will occur regardless of whether inflation and interest rates increase or decrease.
In April, BTC lost nearly 10%. However, the coin surged by 22.6% in March, marking its third consecutive month of growth amidst the normalization of the banking crisis.
Bitcoin concluded February with a 0.9% increase, reaching $23,200. Additionally, in the first month of 2023, the coin jumped by 40%, making January its best since October 2021. Notably, Q1 2023 proved to be the best quarter for Bitcoin since the beginning of 2021, solidifying its position as one of the most profitable assets.
The primary driver behind the growth of the digital currency market has been the impending crisis in the traditional financial market. Stocks and bonds are currently experiencing challenging period, prompting investors worldwide to consider investing in virtual currencies.