Bitcoin has broken below $20,000 for the first time since December 2020, while Ethereum has dipped below $1,000.
It’s the first time Bitcoin has fallen below its previous cycle’s high. Bitcoin topped $19,600 in December 2017 and is now trading lower.
Several factors are contributing to the latest crypto selloff, with some of crypto’s biggest firms affected by the rocky market conditions.
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Ethereum crashed below $1,000 as Bitcoin tumbled.
Bitcoin and Ethereum Extend Losses
Bitcoin and Ethereum keep on falling as the crypto downturn continues.
The top crypto asset broke below $20,000 for the first time since December 2020 early Saturday, trading as low as $19,052 on Coinbase. It’s since posted a slight recovery to $19,272 per CoinGecko data.
BTC/USD (Source: CoinGecko)
Bitcoin’s failure to hold $20,000 is significant because it has historically been an important support level. Bitcoin held above $20,000 for the entirety of the 2021 bull run, topping out at $69,000 in November 2021. It’s now over 70% down from its high.
In previous downtrends, Bitcoin has always held above its previous bull cycle’s high. For example, it topped $1,000 in 2013 and traded at four digits for the whole of the 2017 bull run and subsequent winter. In December 2017, it hit a blow-off top at around $19,600. After today’s price action, Bitcoin has broken a key trend by falling below its previous cycle’s high.
The number two crypto, Ethereum, has also put in a dismal performance in the market of late. Ethereum fell below $1,000, another important psychological trading level, early Saturday as Bitcoin crashed, currently trading at $995. It’s currently on track to close its 11th consecutive week in the red.
Several factors have contributed to the waning momentum in the cryptocurrency market. This week saw Celsius freeze customer withdrawals as it contended with insolvency issues, before Three Arrows Capital, one of the most respected hedge funds in the space, came into its own liquidity crisis. The hedge fund co-run by Su Zhu and Kyle Davies previously held over $10 billion in assets under management and is now rumored to be on the brink of insolvency after a series of margin calls due to trading with excessive leverage during the market downturn. Babel Finance, an institutional-focused lending platform, also halted withdrawals due to low liquidity.
The latest dip comes against the backdrop of a precarious macroeconomic environment that’s seen the Federal Reserve commit to hiking interest rates throughout this year as it battles soaring inflation. Fed chair Jerome Powell announced another 75 basis point hike this week, presenting yet another threat to risk-on assets like cryptocurrencies. Economists worldwide are forecasting a global recession, which could potentially cause further problems for investors.
After today’s dip, the global cryptocurrency market cap is sitting at around $866 billion. That’s a 71% decline from the peak of just eight months ago.
Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.
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