The continued fall in prices
and other cryptocurrencies continued on Wednesday as digital assets took another steep move lower ahead of a Federal Reserve interest rate decision.
Bitcoin is down 10% to $20,300 over the past 24 hours after losing 30% since last Friday. The largest crypto is now flirting with the psychologically important $20,000 mark, which it has not traded below since late 2020.
Like stock market investors, crypto holders are laser-focused on a Federal Reserve monetary policy decision. With inflation at multi-decade high levels, the central bank has already acted aggressively to counter rising prices with tighter policies, including significantly higher interest rates. The risk is that the Fed cannot achieve a ‘soft landing’ or a slowdown in inflation without triggering a recession.
“If the Fed is persistent or if the crypto narrative worsens, Bitcoin is possible at $15,000,” wrote Samir Kerbage, chief product and technology officer at digital asset manager Hashdex, in a note.
While Bitcoin and its peers should, in theory, trade independently of mainstream financial markets, they have shown to be correlated with stocks — and technology stocks in particular. A fall for them
Indices since Friday, after showing signs that inflation was yet to peak, has weighed heavily on digital assets.
But tensions in the crypto market itself, including suspension of customer withdrawals by major crypto lender Celsius, have put even more pressure on cryptos, which have sold off more than stocks.
Exacerbating crypto declines have been large liquidations of leveraged positions in the bitcoin futures market. Positions on margin can be sold on the fly if the value of the collateral – often bitcoin – falls below a required level. According to data from Coinglass, more than 100,000 traders with around $290 million worth of positions have been wiped out in the last 24 hours.
“We may target a quick pullback to $28,000-$30,000 as liquidations ease and Celsius concerns subside,” Kerbage wrote.
It was more of the same pain for other cryptos, including
the second largest. The token, which underpins the Ethereum blockchain network, fell 14% to $1,050 after trading at around $2,000 just late last week.
“Bitcoin at $20,000 and Ether at $1,000 are the levels to watch,” Kerbage wrote. “If these psychologically significant levels are lost, we may see significant fear in the market that could put more pressure on near-term price action.”
Smaller cryptos or altcoins also suffered.
each lost 12%. Memecoins couldn’t keep up either
Decrease of 11% and 8% respectively.
Write to Jack Denton at [email protected]