The price of bitcoin plunged more than 50 percent from the highs of November and dragged down the entire crypto market, which has already lost a trillion dollars of capitalization in a week of selling fury.
The six-month lows marked by the world’s most popular cryptocurrency are the product of extreme risk aversion that is also taking its toll on the rest of the world’s stock markets.
The rest of the major crypto assets could not escape punishment. Thus, the ether accommodated a collapse of almost 8 percent and went to 2,200 dollars, the minimum of July.
Cardano and solana, the emerging currencies of decentralized finance, also sank 19 and 13 percent respectively.
Selling pressure on bitcoin grows
The selling pressure in recent days on the bitcoin has been incessant. Analysts point to the more aggressive prospects expected in the monetary policy of the Fed, whose members meet this Wednesday, as one of the reasons that explain the collapse.
“Cryptocurrencies are a high-growth nascent industry that is traded as a risky asset,” he said. Martha Reyes, research director at Bequant, a European digital asset trading firm.
“What happened this morning is quite dramatic and is completely driven by the macroeconomic environment, shaken by the Federal Reserve,” added this expert.
To all these fears we must add the geopolitical tensions in Ukraine or the intention of the Central Bank of Russia to ban bitcoin mining activities, as China did last summer.
“We don’t think it’s a bad thing if volatility vents the most speculative corners of the market,” the strategists said. de UBS Global Wealth Management.
The risk of a second ‘crypto winter’
Just a few weeks ago, economists at UBS they issued a report analyzing the possible arrival of the second crypto winter. It would be a market phase with heavy losses that could not be recovered for years.
The last one occurred in 2017, when the price of the bitcoin it plummeted from $20,000 to $4,000 in a matter of weeks.
For the Swiss bank’s economists, the Fed was one of the main bullish catalysts for bitcoin with its policy of monetary stimuli. For this reason, if you start doing the opposite now, bitcoin will end up suffering.
In addition, digital money “is not the best in the world,” these experts pointed out. In his view, the normalization of monetary policies will put an end to the notion of debasement of fiat money that has in part allowed the rise of cryptocurrencies.
He disagreed with this pessimistic view Alberto Toribio, ambassador of Cryptoplaza. In his opinion, both bitcoin and ethereum are allowing access to more efficient investment opportunities, with better return/risk ratios compared to traditional money.
The $30,000 lifeline
After the accumulated falls in the last six sessions, the price of bitcoin reached the edge of 33,000 dollars, an already very relevant technical level.
Nearby is the $30,000 round number zone, which is “key to future price development,” he said. Xavier Molina, spokesperson in Spain for eToro.
“Losing the 29,000 would raise all the alarms, trigger the closing of leveraged operations en masse and lead us to look for the 24,000 dollars”, added this expert.
However, before testing the strength of this lifeline, the price of bitcoin has a first control zone at $34,000. If this level is maintained, Molina saw a possible rebound to $40,000.
All in all, and although what is to be expected is some kind of rebound after the strong accumulated overselling, analysts called for caution. “Momentum is to the downside and rebounds are likely to be sold,” he said. Chris Weston, head of research at Pepperstone Financial.