Bitcoin’s Dip From Two-Week Peak Highlights Key Technical Hurdle

(Bloomberg) -- Bitcoin slipped back Wednesday after touching a near two-week high, spotlighting the token's struggle to vault a key technical hurdle and reclaim the $40,000 level.

The world's largest cryptocurrency retreated about 1.3% to $38,300 as of 3:40 p.m. in Singapore, after touching $39,267 a day earlier. Ether, the second-largest coin, fell some 1.5%.

A Bitcoin price trendline drawn from its record high of almost $69,000 in November is proving to be a challenge to overcome. A sustained break above the line could engender optimism that brighter days lie ahead for cryptocurrencies.

A study using Fibonacci ratios -- proportions found in nature that are also used to help identify market shifts -- suggests another test for Bitcoin lies at the $40,000 mark.

The movements of Bitcoin and Ether have closely mirrored stocks of late. For instance, one measure of the correlation between Ether and the S&P 500 has reached a record high.

That backdrop suggests that if shares rally, the tokens might too. Equities may get a tailwind from signs that Federal Reserve officials favor measured monetary-policy tightening rather than more aggressive steps.

“Bitcoin will continue to trade like a risky asset and most likely benefit if central banks continue to show some hesitancy in turning very aggressive with tightening monetary policy,” Edward Moya, senior market analyst at Oanda, wrote in a note.

The upcoming Bank of England and European Central Bank rate decisions “might have a larger impact on cryptos than normal as Wall Street is looking for a cue on which direction risk appetite is headed,” he added.