Bitcoin falls below $ 20,000 for the first time since 2020

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The toxic combination of bad news cycles and higher interest rates was harmful to higher risk assets like crypto

Photo provider: AFP

Bitcoin fell below $ 20,000 for the first time since December 2020, as evidence of increasing stress within the crypto industry has accumulated against the backdrop of monetary tightening.

According to Bloomberg data, the largest digital token in market value fell 9.2% on Saturday to $ 18,740, the 12th consecutive day of decline. Ether broke above $ 1,000 and fell almost 11% to the lowest since January 2021 at $ 975.24. The two bells in the crypto market are both down about 70% from their all-time highs set in early November.

Knargoel, a research analyst at Messari, said:

Altcoin was no exception to the appetite of investors in the wake of the collapse of Bitcoin, with all tokens on Bloomberg’s cryptocurrency monitor trading in the red. Cardano, Solana, Dogecoin and Polkadot recorded a 24-hour decline of 7% to 10% on Saturday, while privacy tokens such as Monero and Zcash lost as much as 9%.

The toxic combination of bad news cycles and higher interest rates was detrimental to higher risk assets like crypto. The Federal Reserve raised key interest rates by three-quarters percentage points on June 15. This was the largest rise since 1994, suggesting that the central bank will continue to raise rates aggressively this year to curb inflation.

“Investors remain defensive following last year’s liquidity-led bullish market for digital assets,” Arqueshshire, head of cryptocurrency and digital asset strategies at Bank of America Corporation, said in a note on Friday. I’m continuing. ” “It’s a pain, but it’s probably healthy to get rid of the sector bubble as investors focus on projects with a clear roadmap for cash flow and profitability, resulting in pure earnings growth.”

The collapse of the Terra blockchain last month has shown signs of broader stress, exacerbated this week following a recent decision by crypto lender Celsius Network Ltd. to stop withdrawing.

In addition to the mood, crypto hedge fund Three Arrows Capital suffered significant losses and said it was considering selling or bailing out its assets, and another lender, Babel Finance, followed in the footsteps of Seth on Friday. Even long-term owners, who have previously avoided selling, are under pressure, according to Glassnode researchers.

Stablecoin, a type of crypto asset fixed to the value of fiat currencies such as the US dollar, is also struggling.

According to Bank of America’s Shah, the top four stablecoins last week were 4.5 times more net outflows than last week, with net outflows in eight of the last ten weeks. Sustainable outflows show that investors continue to defend, as Stablecoin is often relied on by crypto traders to move funds within the ecosystem without having to go out into traditional currencies. He added that he was.

According to Bloomberg Intelligence analyst Mike McGlone, historical data shows that even if a hole is made in the major $ 20,000 level, Bitcoin may find major support around that mark.

Bitcoin “has the potential to build a foundation of about $ 20,000, as it was about $ 5,000 in 2018-19 and $ 300 in 2014-15,” he said in a note on Wednesday. .. “Lower volatility and higher prices are a landmark for a mature digital value store.”

The crypto market is now only part of its height in late 2021 when Bitcoin traded close to $ 69,000 and traders poured cash into all striped speculative investments. According to CoinGecko price data, the market capitalization of cryptocurrencies was about $ 880 billion on Saturday, down from $ 3 trillion in November.

© 2022 Bloomberg LP

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