Bitcoin fell more than 13% at one point on Saturday. The Bitcoin falls below the $20,000 level to its weakest level. The falling happened in 18 months. It has extended a drop in investor concerns about growing problems in the industry. Investors are concerned about the pullback of riskier assets.
The digital currency sector hits, and cryptocurrency lending company Celsius froze withdrawals this week. It also hits transfers between accounts, while cryptocurrency companies began laying off employees. There were also reports that a cryptocurrency hedge fund had run into trouble.
The accelerated pace and depth of bitcoin’s losses coupled with falling stocks. Falling stock could challenge support for the cryptocurrency from a variety of investor groups.
While some institutions bought bitcoin in the hope that it would offset declines in stocks and bonds. “it has not shown that it is an uncorrelated asset,” said Michael Purves, founder, and CEO of Tallbacken Capital.
“The case for institutions to buy the fall is more challenging now given that the usefulness of bitcoin has yet to be proven,” he said.
“This is going to cut between $15,000,” he said. “There is so much downward speed.”
Bitcoin, the largest cryptocurrency, had fallen around 13.7% on Saturday afternoon. This fell to a low of $17,593, its weakest level since December 2020, before retreating to $18,556, still down 9.22%.
It has lost around 60% of its value this year, while rival cryptocurrency Ether backed by Ethereum is down 74%. In 2021, Bitcoin peaked at over $68,000.
“Breaking through $20,000 shows you that confidence has collapsed for the crypto industry and that you’re seeing the latest tensions,” Edward Moya, senior market analyst at OANDA, said on Saturday.
Moya said that “even the loudest crypto cheerleaders of the big rally are now silent. They are still optimistic in the long run, but they are not saying that this is the time to buy the fall.”
The sector has also suffered losses after companies such as Coinbase Global Inc (COIN. O), Gemini and BlockFi said they would lay off thousands of employees as investors abandon risky assets.
The fall is affecting retail investors who bought the asset.
“There are a tremendous number of people who will be scarred forever,” Moya said, referring to retail shoppers. “But there are still a lot of people who were about to enter space, and there is still interest.”
Jeffrey Gundlach, CEO of DoubleLine Capital, said Wednesday that he wouldn’t be surprised if bitcoin fell to $10,000.
Others say the deepening slide could force more investors to offload bitcoin, which rose along with other risk assets during the pandemic-related stimulus era.
“The $20,000 level for Bitcoin is an important technical level and the drop below can trigger more margin calls that result in forced liquidations,” said Jay Hatfield, chief investment officer at Infrastructure Capital Management in New York.
“Bitcoin may fall below the $10,000 level this year as the Fed’s liquidity-driven bubble bursts completely with bitcoin returning to its pre-pandemic levels,” he said.
At Saturday’s lows, bitcoin was in danger of closing below the key levels identified by technical analysis, which could reinforce bearish sentiment.
One of those levels was $19,225, the Fibonacci retracement level of 76.4% of its increase during the pandemic.
The other was $19,666, the cycle high for the previous bitcoin rally that peaked in 2017.
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