Despite mounting a spirited surge on Thursday after the US central bank announced its biggest interest rate rise in nearly 30 years, Bitcoin bulls encountered heavy resistance around $20,000, prompting the number one cryptocurrency to pull back sharply on Saturday.
An hour into the London session on Saturday, Bitcoin was trading at $19,362 which is a 33% decline in 7 days, and an 8.65% dip in the past 24 hours. Most altcoins also took a hit on Saturday. Ethereum, BNB, XRP, Cardano, and Solana gave back 8.40%, 6.31%, 6%, 5%, and 6.76% in the past 24 hours respectively. DOGE and SHIB also declined roughly 6% each.
At the World Economic Forum in Davos, Guggenheim’s Scott Minerd predicted that the cryptocurrency winter could last for a long time with Bitcoin’s price falling to $8,000.
Saturday’s sell-off has seen over $287 million liquidated with Bitcoin alone accounting for close to half of that amount according to data from Coinglass. Amid the crypto plunge, major US stocks also retreated while Gold(XAU) and the Dollar Index (DXY) ticked higher.
The weakness exhibited across markets can be trailed back to macro-uncertainties that are keeping investors on the sidelines. On Tuesday, President Joe Biden stated that his administration will provide the central bank with the “independence it needs to tackle inflation” in a meeting with Fed Chair Jeremy Powell.
On the same day, Treasury secretary Janet Yellen posited that she was wrong when she said last year that inflation only posed a small risk, affirming fears that the Fed could tighten the recovery noose until something snapped. This, atop an already fractured market structure, sent Bitcoin’s prices dangling, threatening a broader downtrend in prices.
That said, the overall conditions on all risk assets have been choppy this year, with the overall theme remaining risk-off. While May was a tough month, Bitcoin’s behavior in June so far points to an even bleaker month.
According to Nicholas Cawley, a strategist at DailyFX, “Bitcoin needs to trade back above $40k before any kind of bullish outlook can be confirmed.”
However, according to crypto chartist Kevin Svenson the higher the BTC market cap, the more money is required to move the price. To him, in the current situation, such kind of money would only come from Wallstreet which means a higher degree of correlation with the stock market.
Unfortunately, stock market investors are already drowned in their own sorrows which suggests that buying pressure on cryptos may not be forthcoming.
BTCUSD Chart by TradingView
That said, while BTC has just extended its losses following a plunge below $19k – and more so in a tiny range of chop, it can be difficult to figure out which direction the price will go from here. However, a break below the $18,000 range could set it up for more carnage, possibly headed to sub-$10k. If the inverse happens, Bitcoin could rally to $25,000, its nearest and strongest overhead resistance.