bitcoin reversed its overnight rise to $94,000, falling back to $92,000 during US time on Thursday, continuing choppy action in the range after wild moves first lower and then higher earlier in the week.
Ethereum ether held relatively well, down just 0.7% on the day and changing hands above $3,100 in the afternoon hours. Among the alternative currencies, Hedera (HBAR), and privacy-oriented Zcash led the decline with declines of 4% to 5%, while the broad-market CoinDesk 20 index was 2% lower.
Hectic operations ahead
Despite the pullback, BTC continues to hold well above the support level established around $85,000 earlier this week, suggesting markets may be settling into a holding pattern as liquidity declines towards the end of the year, Paul Howard, senior director at trading firm Wincent, said in a note.
“We continue to see cryptocurrency prices being closely correlated with global macroeconomic developments,” said Paul Howard, senior director at Wincent. “Although December is typically a low liquidity month, we note that a higher floor has been set over the past seven days, around the $85,000 level.”
With no new major macro headlines, Howard expects more trading in the $85,000 to $95,000 range for the remainder of the month. “There is potential for outperformance in altcoins, which typically perform well in an environment of low liquidity and higher volatility,” he added.
All eyes on Japan
On the macroeconomic front, markets are entering 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 bitcoin investment advisory Risk Dimensions, the Bank of Japan’s rate decision is this month’s “key event” as it determines the future of the yen-financed carry trade, a strategy in which investors borrow in yen to buy higher-yielding assets.
If the Bank of Japan keeps rates steady, as Connors hopes, it could reignite demand for risk assets and provide a tailwind for stocks, bitcoin and gold.
