Bitcoin and cryptocurrency prices continue to sell off, with Bitcoin briefly dropping to a low just above $41,000. This is the largest weekly Bitcoin guidance since November. The world’s #1 cryptocurrency is now down 37% from its $58,000 peak that month.
The rest of the cryptocurrency is giving it selling pressure. Today, Ethereum price is down 3.16%, Binance Coin price is down 1.44%, Solana is down 4.44%.
What is this fuss?
There are two main narratives that weigh in on cryptocurrency prices.
First, as I wrote yesterday, the Fed is making a rapid shift in its policy to tame inflation: “As recently as last March, the Fed pledged not to raise interest rates until 2024. The market sees a strong possibility that the first increase will come at the next meeting of the Fed. Federal Reserve in March.
Price increases do not bode well for the price of Bitcoin because the price action shows that it behaves more like a technical stock than a safe asset. Technology stocks are the hardest hit by the rate hike.
“In fact, the recent Bitcoin slump coincided with the 10-year Treasury yield rising from 1.52% on December 31 to 1.71% currently. Cryptocurrency prices are closely correlated with the Nasdaq index.
Second, the unrest in Kazakhstan – which has become the world’s second largest mining hub after China’s crackdown on miners – has shut down the internet nationwide, knocking out 18% of global cryptocurrency mining capacity (also known as the hash rate).
“The hash rate is not directly correlated with the price of bitcoin, but it does give an indication of the network’s security, so a drop could scare off investors in the short term,” wrote Marcus Sotirio, digital asset analyst at GlobalBlock.
Bitcoin Could Drop to $30,000 Amid ‘Extreme Fear’
This unfortunate macro background raises the ranks of the bears in the cryptocurrency market.
Crypto Ed, one of the most popular crypto commentators on Twitter, warned that Bitcoin could drop to its September lows of 30,000: “[Bitcoin] It may also drop with the liquidation wick, below the September lows,” he predicted amid yesterday’s crypto defeat.
Anthony Trenchev, founder of crypto lending platform Nexo, told Bloomberg that if bitcoin drops below $41,000, it could “get ugly, representing the mid-30s to the lowest possible destination.”
Meanwhile, the Bitcoin Fear & Greed Index, a measure of sentiment among crypto market participants, indicates “extreme fear.” According to Coindesk analysis, the scale has remained negative for an unusually long time and is at its lowest level since July.
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