Bitcoin faces another bloodbath as liquidity dries up further
The Federal Reserve and other central banks hike interest rates recently, leading liquidity across markets to continue to shrink.
- Bitcoin’s 12-month losses currently stand at -43%.
- The digital currency is currently down 74% from its all-time-high value.
- Experts believe Bitcoin could dip as low as $17,000 over the coming few days.
Bitcoin (BTC) dropped as low as $17,611 earlier this week before witnessing a minor bounceback. However, the asset has failed to break past its all-important $20,000 resistance, leading analysts to believe that more bloodshed may be on the cards. BTC’s weekly losses now stand at -25% while trading at $21,371.
The ongoing downturn comes as low liquidity conditions pervade markets across the board, including equities, crypto and commodities. Central banks across the world — including Europe, North America, Australia and others — have continued to increase borrowing rates to taper the effects of their fiat issuance efforts over the last couple of years. Bitcoin has now fallen to a price that it last hit back in November 2020.
It is the first time Bitcoin has dipped under a previous halving cycle — an event that takes place once every four years and results in BTC’s block reward ratio being slashed — an all-time high. While most retail investors are panicking, analysts believe that the ongoing price movements still correspond with historical bear market movements. Prominent German economist Holger Zschaepitz noted:
“To put things into perspective, a Bitcoin crash of 74% at present is nothing unusual. In history, there have already been four collapses in which the leading cryptocurrency went from peak to trough by >80%.”
No recovery on the horizon
As far as Bitcoin’s near-term price action goes, the currency could dip as low as $17,000 before forging any sort of meaningful comeback. However, some analysts have pointed out that the digital asset is still moving in line with its 200-week moving average (MA), a key support market during bear markets. This suggests no trend reversal anytime soon.
On-chain data shows that the past 20 days have been the worst for Bitcoin in terms of loss accrual, beating even the numbers recorded during 2013’s bear market. Between June 16 and 19, more BTC was sold than any other time in its decade-old history. While fears of a total network capitulation also loomed due to miners’ rewards being reduced greatly, many experts don’t feel that to be the case.
El Salvador president Nayib Bukele unfazed by dropping prices
After welcoming BTC as legal tender within his country’s borders late last year, Nayib Bukele, president of El Salvador, has been receiving a lot of flack for his decision. However, despite rapidly falling prices, Bukele decided to share some words of advice with fellow Bitcoin HODLers, stating:
“I see that some people are worried or anxious about Bitcoin’s market price. My advice: stop looking at the graph and enjoy life. If you have invested in BTC, your investment is safe, and its value will immensely grow after the bear market. Patience is the key.”
Disclosure: The author owns a range of cryptocurrencies at the time of writing.
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