According to Coin Metrics, the price of bitcoin increased by nearly 4% to $20,881.56. It hit a low of $17,958.05 during the weekend, its lowest level since December 2020. The steps follow a slew of negative reports about the bitcoin market. Last week, wholesale prices hit a near-record high, and the Federal Reserve boosted interest rates.
“To put it simply, Bitcoin’s weekend slump was not deep enough,” said Yuya Hasegawa, a crypto market analyst at Bitbank, a Japanese bitcoin exchange. “There hasn’t been a clear evidence of inflation easing, and the Fed may still send the economy into a tailspin by hiking rates too quickly or failing to control inflation.”
Employees at cryptocurrency startups like Coinbase and BlockFi are being laid off. Insolvency worries have been sparked by crypto lenders who offer consumers huge rates in exchange for depositing their digital currency. Some cryptocurrency investors are wary about bear market rebounds, believing that the asset class may fall considerably deeper before experiencing a real recovery.
According to one researcher, Marcus Sotiriou, bitcoin’s price might hit $23,500 as short-sellers are pressed. When the price of a severely shorted asset rises, short-sellers are pushed to buy more of the asset to cover their holdings, this is known as a “short squeeze.” Marcus Sotiriou: Bitcoin is facing resistance at $21,300, but if it can break through, it will be able to achieve the next objective of $24,000.
Since peaking above $69,000 in November, Bitcoin has gone through two “distinct collapse stages.” The collapse of the TerraUSD stablecoin in early May sparked the first. According to the CEO of decentralized financial platform ALEX, some major crypto holders are “chasing liquidations to benefit from squeezing other participants out.”
Celsius Network Ltd., the embattled crypto lending platform, said on Monday that it needed additional time to reestablish its liquidity and operations after freezing deposits in June. The heavy demand for Defi applications adds to the uncertainty. When pandemic-era stimulus fueled a record-breaking crypto bubble, their popularity skyrocketed. They are now being compelled to take unusual precautions to avoid a chain reaction of liquidations.
Investors’ attitude toward risk assets like technology stocks and cryptocurrencies has deteriorated. A hawkish Federal Reserve has raised fears of a lengthy economic downturn.
Last week, Fed Chair Jerome Powell raised interest rates by 75 basis points. Meanwhile, crypto market experts are suspicious of the present market relief.
A group of senior Chinese crypto-investors has warned that record levels of fear, uncertainty, and doubt in the market could unleash a cascade of drawdowns as the market sees a significant wave of capitulations. According to one of the executives, such dynamics might allow crypto-focused investors to take advantage of an “undervalued market.”