Standing below $40,000 after a slump that began the night before, Bitcoin finds itself in a price range not seen since August last year. Despite being priced at $38,500 at the moment, that doesn’t appear to be the bottom.
While there aren’t many recent reasons for this drop, other than Russia’s BC trying to ban mining and general use, it’s important to note that this bearish sentiment started back in November.
Since then, Bitcoin has dropped 44% and around 8% in the last 24 hours alone. The reason may be the increase in interest rates, carried out in several countries that seek to control inflation.
Governments controlling inflation
As one of the biggest properties of Bitcoin is that it is a controlled-supply asset, with 21 million units, many people are starting to use it as a hedge against the loss of purchasing power of fiat currencies.
As an example, one of the largest economies in the world, the US, has registered inflation not seen in four decades. This is a great reason why Bitcoin has marked a 66% rally during 2021.
Despite this, the price of Bitcoin has been falling since November, when it reached its all-time high of $69,000. The reason may again be related to inflation, this time due to the reduction of Fed stimulus such as the increase in interest rates.
With strong bearish sentiment, not even Google’s possible entry into the cryptocurrency sector or Intel’s mining machines managed to push its price higher this week. And that might have been a good indicator for the more experienced ones.
Bitcoin knocks down every market
After the accumulated losses of the sector reached the 1 trillion dollar mark, the cryptocurrency market lost another 200 billion this Friday (21).
Marked by a peak of $3 trillion in November, the entire market capitalization now stands at $1.8 trillion. As a comparison, when at the top, Bitcoin alone was worth 1.27 trillion.
Among the top 10, all are experiencing larger drops than Bitcoin. The second largest, Ethereum, has lost its $3,000 support and is already down 11% daily. The same goes for all others like BNB, Cardano, Solana and XRP.
As a result, even though these smart contract-focused coins have a different function than Bitcoin, their fate is once again being guided by it. So if you trade altcoins, be sure to look at BTC first.