Bitcoin headed lower on January 20 as the world prepared for United States President-elect Joe Biden to assume office.
Data from price trackers including CoinMarketCap and TradingView showed selling pressure step up on spot markets during Wednesday trading, with BTC/USD testing $34,000.
BTC price probes $34,000 support
The hours prior to Biden’s inauguration saw a rebound in a previously declining U.S. dollar, something which came in tandem with BTC/USD cementing daily losses of 7%.
The largest cryptocurrency had previously spent the week ranging slightly higher, with speculation rife that a breakout was due but that the direction it could take was unclear.
Further agitation came from incoming Treasury Secretary Janet Yellen, who on Monday singled out cryptocurrency as a source of money laundering and other illicit activity.
“Cryptocurrencies are a particular concern,” she told the Senate Finance Committee.
“I think many are used at least in a transaction sense mainly for illicit financing and I think we really need to examine ways in which we can curtail their use and make sure that anti-money laundering doesn’t occur through those channels.”
A broad retracement thus set in across crypto markets, with altcoins outpacing Bitcoin’s performance to shave 10% or more off their prior levels. Ether, the largest altcoin by market cap, traded at $1,260 at press time after hitting new all-time highs the day before.
“…The critical level was $34,000. $34,000 is being held as support; however, you want to see a clear breaker above $36,500 and now you actually want to see it above $37,500,” popular trader Michaël van de Poppe said in his latest YouTube update on Wednesday.
“However, we have been testing this support for three times now already, so if we can’t break towards $36,700 and in the best case $37,400 and we test support again, the likelihood of falling down is significant… we might be taking the lows below the $30,000 level, in which we get a correction of 15%, causing altcoins to correct a little as well.”
Money printing raises alarm
As Yellen meanwhile outlined her plans for fiscal policy during testimony, concerns were already mounting about their long term impact on the economy.
A $1.9 trillion coronavirus stimulus package would constitute “a short-term positive but a long-term negative,” one analyst told Reuters, while also triggering renewed interest in risk assets. Ultimately, Bitcoin could profit from the inflationary move.
“The long term fiscal trajectory is a cause for concern. It is something we will look into… But it is also important for America to invest,” she added to the Senate.
Last week, as news of Biden’s stimulus plans gathered steam, exchange co-founder Tyler Winklevoss described it as “another multi trillion dollar advertisement for Bitcoin.”
The erosion of purchasing power thanks to inflation of the USD supply formed a key impetus behind mass migration to Bitcoin by MicroStrategy, the CEO of which, Michael Saylor, likened the company’s cash reserves to a “melting ice cube” last summer. MicroStrategy now owns more than 70,000 BTC.