Bitcoin Gold prices remained hovering around $88,000 on Monday as gold and silver extended strong gains before giving back gains.
Bitcoin prices edged up slightly from a new pattern of panic selling over the weekend, but were down from around $90,000 on Friday night. The rising possibility of a government shutdown on January 31, and the resulting liquidity crunch, was one of the main reasons for Sunday’s sell-off.
However, the same news did not worry precious metals bulls. On Sunday and Monday, gold surged to $5,000 for the first time before breaking above $5,100 for the first time, while silver soared to $118. Still, signs of fatigue may be showing. Gold has fallen all the way back to $5,043 and is currently up 1.3% on the day, while silver has fallen back to $108, still up 7%.
Summing up Bitcoin investor sentiment, high-profile cryptocurrency analyst Will Clemente wrote: “Gold and silver casually added to the entire Bitcoin market cap in a single day.”
The U.S. dollar index (DXY) fell to its lowest level since September as the Federal Reserve and the Bank of Japan reportedly joined forces to intervene in currency markets in an attempt to boost the yen against the U.S. dollar. The dollar fell more than 1% against the yen on Monday to 154.07.
Bitcoin will remain range-bound
Swissblock analysts believe that Bitcoin’s lack of bullish follow-through despite U.S. dollar weakness is making traders cautious in the short term. “Recent price action reinforces the bearish outlook,” they said in a note on Monday.
They warned that a break below the $84,500 support could open the door to a further pullback towards $74,000. However, they note that if this support holds while risk indicators cool, it could provide bulls with a compelling entry point.
Bitfinex analysts are also cautious, noting that BTC is likely to remain range-bound between $85,000 and $94,500. They also pointed to changes in the options market, with traders reacting tactically to short-term risks without pricing in longer-term volatility.
This means traders are “priced in transitory risks rather than ongoing disruption to market structure,” analysts wrote in a Monday note.
An ongoing sell-off in spot Bitcoin ETFs added to the pressure. Cumulative outflows exceeded $1.3 billion in the past week, indicating a lack of risk appetite among investors.
Government Shutdown Risks of Crypto Legislation
Jim Ferraioli, director of cryptocurrency research and strategy at Schwab, believes that if indicators such as on-chain activity, ETF flows or derivatives positions and miner participation do not pick up, there is no reason to expect Bitcoin prices to sustain beyond current levels.
He believes a more important catalyst is passage of the Clarification Act, but that could be delayed by the possibility of a government shutdown. Ahead of the passage of the legislation, he expects trading to be tight between the low $80,000s and mid-$90,000s as major institutional players will remain on the sidelines.