Bitcoin fell below $20,000 for the first time since December 2020, a sign of increasing stress in the crypto industry against a background of tightening monetary policy.
Bitcoin dropped as much as 6%, to $19,377.08 on Saturday in Hong Kong, the 12th consecutive day, the largest token in terms of market value has dropped. Ether briefly crossed the $1,000 mark and fell to $999.86. This is the lowest level since January 2021.
18 Jun, 08:49 UTC · Disclaimer
In a June 16 note, Edward Moya, Oanda’s senior market analyst, stated that rising recession fears have made it difficult for crypto traders to buy Bitcoin at these lows. “The news flow has been horrible for cryptos.”
On June 15, the Federal Reserve increased its main interest rate by three-quarters percent — the largest increase since 1994. Central bankers also signalled that they would continue to hike aggressively this year in an effort to control inflation. Higher rates have been detrimental to crypto assets, which has led to a 70% drop in Bitcoin’s value from November’s peak.
Markets that began to slide late last year due to expectations of a more accommodative Fed are now in deeper trouble. This is after the collapse of Terra Blockchain last month and the recent decision of Celsius Network Ltd., a crypto lender, to stop withdrawals. Three Arrows Capital, a crypto hedge fund, suffered significant losses last month and announced that it was considering asset sale or a bailout. Glassnode researcher says that even long-term holders who had avoided selling up to now are being forced to sell.
According to Mike McGlone (an analyst at Bloomberg Intelligence), historical data shows that Bitcoin could find support for around $20,000 despite the level’s breach. Previous selloffs have shown where the token has found points of resilience.
He stated that Bitcoin could “build a base about $20,000 like it did at approximately $5,000 in 2018-19, and $300 in 2014-15,” in a June 15 note. “Declining volatility is a sign of the maturing digital-store-of-value.”
Today, the crypto market is only a fraction of what it was in late 2021 when Bitcoin traded at $69,000 and traders invested their cash in speculative investments. According to CoinGecko, the total market cap for cryptocurrencies stands at $900 billion. This is down from $3 trillion in November.
“Sentiment within crypto markets is that unknown unknowns are most significant at the moment in time,” stated Ainsley To, Noelle Acheson, and Konrad Laesser from Genesis Trading in a Thursday note. “The resurgence in counterparty risk is a reminder of the fact that not all that is important in risk management can accurately be quantified. After you’ve considered everything, the risk is what remains.
