bitcoin It remained stuck in limbo around $88,000 on Monday as gold and silver extended their dizzying rallies before paring their gains.
BTC is up a bit from what is now becoming a renewed pattern of panic selling over the weekend, but is down from around $90,000 on Friday night. The increasing odds of a government shutdown on Jan. 31 – and the reduction in liquidity that could entail – were among the main reasons for Sunday’s sell-off.
However, that same news left precious metals bulls unfazed. Gold shot up to $5,000 and then $5,100 for the first time on Sunday and Monday, while silver hit $118. However, signs of exhaustion could be emerging. Gold has fallen to $5,043 (now up 1.3% on the day), while silver has fallen to $108, up even more by 7%.
“Gold and silver casually add an entire bitcoin market cap in a single day,” wrote well-known crypto analyst Will Clemente, summing up the mood of bitcoin investors.
The US Dollar Index (DXY) fell to its weakest level since September as the US Federal Reserve and the Bank of Japan reportedly teamed up to intervene in currency markets in an attempt to boost the yen against the dollar. At 154.07 per yen, the dollar fell more than 1% on Monday.
Bitcoin will remain range-bound
The lack of bullish follow-through in bitcoin despite dollar weakness has made traders cautious in the short term, Swissblock analysts argued. “Recent price action has reinforced the bearish outlook,” they said in a note on Monday.
They warned that a decisive break below the $84,500 support level could open the door to a deeper correction towards $74,000. Still, they noted that if this support holds as risk metrics cool, it could offer a compelling entry point for bulls.
Analysts at Bitfinex echoed the cautious tone, noting that BTC is likely to remain range-bound between $85,000 and $94,500. They also pointed to changes in the options market, in which traders respond tactically to short-term risks without pricing long-term volatility.
That means traders are “pricing in transitory risk rather than a sustained disruption to market structure,” the analysts wrote in a Monday note.
Adding to the pressure is the persistent selling of spot bitcoin ETFs. Cumulative outflows exceeded $1.3 billion over the past week, indicating a lack of risk appetite among investors.
Government Shutdown Risk for Cryptocurrency Legislation
Schwab’s head of crypto research and strategy Jim Ferraioli sees little reason to expect a sustained move beyond current levels without a rebound in metrics such as on-chain activity, ETF flows or derivatives positioning and miner participation.
A more important catalyst, he said, is the passage of the Clarity Act, but it could be delayed by the possibility of a government shutdown. Until the legislation is passed, expect a close negotiation between $80,000 and $90,000, as the main institutional players will remain on the sidelines.
