According to data from CoinMarketCap, Bitcoin – the world’s largest cryptocurrency – on Sep 7 has fallen below $19,000, losing 72.58% of its value from the record high of $68,789 in November last year. This marks the lowest price of Bitcoin since June this year.
The total market cap of the entire crypto market has also dropped below $1 trillion, evaporating nearly $2 trillion from the peak of $3 trillion at the end of last year. The sell-off is broadening to other cryptocurrencies.
Market Falters
Bitcoin price slipped below $19,000 as the global market fell and the dollar continued to strengthen. Meanwhile, the price of Ether, the world’s second largest cryptocurrency, plunged more than 7% over the past 24 hours to $1,543. The growth of Ether in the last few months has outstripped Bitcoin.
Central banks around the world are tightening monetary policy in response to inflation. Since the beginning of the year, the US Federal Reserve (FED) has raised interest rates by a total of 2.25 percentage points. Investors predict the US central bank will continue to raise interest rates in the near future. The Fed’s policy tightening plan has strengthened the dollar that will even put more pressure on risk assets. 10-year US Treasury yield also rose sharply.
Bitcoin price moves in the same direction as stocks, so the sell-off of other markets has spread to the crypto market. Bitcoin price plunges as Fed Chair Powell continues to tighten monetary policy to deal with inflation, Edward Moya, senior market analyst based in the US said. Investors’ confidence has weakened as the Fed aggressively curbs inflation, even if it will have to pay with an economic downturn, he added.
Higher interest rates mean higher borrowing cost; moreover, a dark economic outlook also affects investor confidence, especially retail investors.
Waiting for the dollar to depreciate
The global macro environment remains volatile while the dollar remains strong, this affects all risk assets, said Vijay Ayyar, head of Asia Pacific & Global Expansion at Luno. Only when the strength of the dollar decreases can risk assets like Bitcoin rise again, the expert added.
Besides disadvantages of the macro environment, the crypto market is also suffering from collapsed projects and bankrupt firms. However, according to Mark Newton, a strategist at Fundstrat, Bitcoin’s slipping below the key mark will only adversely affect the market in the short term. It could be an opportunity for investors to catch the bottom and Bitcoin price is forecast to rise in upcoming November.
Bitcoin has been trading in the range of $18,000-24,000 since June. Mr. Ayyar thinks that if it doesn’t fall below $17,500, Bitcoin’s price will continue to fluctuate in this range.
Meanwhile, Ether and other altcoins have outperformed Bitcoin. After plunging in June along with Bitcoin, Ether at one point spiked to nearly $2,000 in mid-August. Ether is the native cryptocurrency of Ethereum. This network is planning for a major upgrade in September, which is expected to make it more efficient, attract more new investors and bring higher profits.
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