Bitcoin is trading below $20,000 on a regular basis for the first time since the middle of July. This is because people are less willing to take risks after Federal Reserve Chair Jerome Powell said that interest rates may need to keep going up to fight inflation.
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On Monday, the largest token fell as much as 2.3% to $19,527, marking the sixth consecutive day of declines.Bitcoin had temporarily fallen below $20,000 in the days after Powell’s remarks at the Jackson Hole conference on Friday, but it immediately returned to trading in the vicinity of this significant milestone. In addition to US futures, Asian and European stocks also declined.
“Money is leaving riskier investments.” Cryptocurrency followed the “quick adjustment of the U.S. stock market” following Powell’s comments, according to Cici Lu, CEO of the consultancy firm Venn Link Partners. The markets did not appreciate what he had to say, and Bitcoin has resumed its status as a high-beta asset.
In recent months, the $20,000 mark served as support for Bitcoin when it hit lows, but in recent weeks, the cryptocurrency has climbed higher. Prior to Saturday, the price had not dipped below $20,000 since July 14 and had even surpassed $25,000 in early August. As fears of a rate hike grew, this mini-rally came to an end, and Bitcoin has dropped almost 20% since August 15.
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Uncertainty about how and how much the Fed will raise interest rates, as well as how that might affect riskier assets, has contributed to the swings.
Numerous analysts have identified $20,000 as a crucial level for Bitcoin, but support might be found at lower prices.
Katie Stockton of Fairlead Strategies anticipates long-term support between $18,300 and $19,500. Mark Newton, a strategist at Fundstrat, identified some critical locations in the $19,000 range on Friday, with a “true region of importance” of about $17,500, near the June lows, that would provide a 100% alternative wave projection of the most recent collapse from mid-August.
“If Bitcoin fails to maintain $20,000, then $18,900 becomes a potential target before the June intraday low of $17,600,” wrote Nexo co-founder and managing partner Antoni Trenchev in a note published Sunday. “Below that, it does not appear attractive.”
According to statistics from Asian Trade Tv, $288 million in crypto longs were liquidated on the most recent Friday, indicating that the previous two Fridays have been difficult for the cryptocurrency market. Longs worth $562 million were liquidated on August 19, the largest since June 13.
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Ether, the second-largest cryptocurrency, dropped as much as 4.1% on Monday to $1,422.67, extending a slump from nearly $2,000 a few weeks ago. Prior to its much-anticipated Merge update, scheduled for mid-September, it has fluctuated.
“Ethereum’s decline ahead of the next merge is particularly noteworthy, as pessimistic sentiment looks to be gaining traction across all so-called risk assets,” Bitfinex analysts said in a Friday note. “There are no indications that the volatility that has become so distinctive of the digital token market will abate.”