Bitcoin and cryptocurrency prices continue their sell-off, with bitcoin briefly bottoming just shy of $41,000. This is bitcoin’s worst weekly drop since November. The world’s #1 cryptocurrency now shed 37% of its value from the $58,000 peak.
The rest of the cryptocurrency market is giving it to the selling pressure. Today the ethereum price slipped 3.16%, Binance coin is down 1.44%, and solana’s price sank 4.44%.
What’s the fuss?
There are the two main narratives that are weighing down cryptocurrency prices.
First, as I wrote yesterday, the Fed made a swift U-turn in its policy to tame inflation: “As recently as last March, the Fed pledged not to raise rates until 2024. Today its officials penciled in three rate hikes this year alone. And the market sees a strong possibility that the first hike is coming at the next Fed meeting in March.”
Rates hikes don’t bode well for bitcoin because its price action shows it behaves more like a tech stock than a safe-haven asset. And it’s the tech stocks that rising rates hit the hardest.
“In fact, bitcoin’s recent slump coincided with the 10-year Treasury yield surging from 1.52% on December 31 to currently 1.71%. And cryptos’ prices are closely correlated to the Nasdaq
Second, the unrest in Kazakhstan—which became the world’s second-biggest mining hub after China’s crackdown on miners—led to a nationwide internet blackout, bringing 18% of global crypto mining capacity (aka hash rate) to a grinding halt.
“The hash rate is not directly correlated to the price of Bitcoin, but it gives an indication of the network’s security, so a fall can spook investors in the short term,” wrote Marcus Sotiriou, digital asset analyst, at GlobalBlock.
Bitcoin might tumble to $30,000 amid “extreme fear”
This unfortunate macro backdrop is raising the ranks of bears in the crypto market.
Crypto Ed, one of the most popular crypto commentators on Twitter, warned bitcoin could tumble to the September lows of $30,000: “[Bitcoin] Could even go lower with a liquidation wick, below September lows”, he predicted amid yesterday’s crypto rout.
Antoni Trenchev, founder of crypto lending platform Nexo, told Bloomberg if the bitcoin price broke below $41,000, it “could get ugly, with the mid-to-low thirties a possible destination.”
Meanwhile, the Bitcoin Fear & Greed Index, which is a yardstick for sentiment among crypto market participants, signals “extreme fear”. According to a Coindesk analysis, the measure stayed negative for an unusually long time and is at its lowest level since July.
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