Bitcoin and other cryptocurrency values have continued their decline, with bitcoin momentarily falling below $41,000. This is the steepest weekly decline in bitcoin since November. The world’s most valuable cryptocurrency has already lost 37% of its value from its $58,000 high. The remainder of the crypto market is succumbing to selling pressure. Today the ethereum price slipped 3.16%, Binance coin is down 1.44%, and solana’s price sank 4.44%. Crypto What’s the big deal? There are two major themes pulling bitcoin prices down. 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 authorities announced that they would boost rates three times this year. 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 is the technology equities that bear the brunt of increasing interest rates. In fact, bitcoin’s recent slump coincided with the 10-year Treasury yield surging from 1.52% on December 31 to currently 1.71%. Additionally, cryptocurrency values are highly associated with the Nasdaq.
NDAQ NDAQ +0.2% index, which consists of America’s top tech darlings.”
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 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: “ 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. Stay ahead of the crypto trends with Meanwhile in Markets… Every day, I put out a story that explains what’s driving the crypto markets. Subscribe here to get my analysis and crypto picks in your inbox.