Cryptocurrency analysts had warned of the possibility of a steeper sell-off, and now traders are wondering when and where the market shakeout might end.
Bitcoin fell for a seventh-straight day, the longest losing streak since 2018, slipping toward the key psychological threshold of $40,000.
As of press time, Bitcoin (BTC) was changing hands around $40,800, down 2.3% over the past 24 hours, based on CoinDesk pricing. Bitcoin’s stretch of losses is now the longest since the downdraft from July 30 through Aug. 4 in 2018.
The price hasn’t fallen below $40,000 since September 2021, and it’s well off the all-time high near $69,000 reached in November.
Launched in 2009, bitcoin celebrated its 13-year birthday last week, but there hasn’t been much of a party.
Crypto market analysts had warned recently that bitcoin might be prone to a steeper sell-off, though there were some signs late last week that the market might be stabilizing. January tends to be a seasonally weak month for bitcoin, but this year has been especially harsh, with the largest cryptocurrency down 11% so far in 2022.
The market was roiled last week by the release of Federal Reserve minutes signalling that officials at the U.S. central bank were starting to discuss whether to take more aggressive steps to tackle an inflation rate now at its highest in almost four decades.
Many investors say bitcoin has benefited in recent years from the Fed’s ultra-loose, emergency monetary policy since the coronavirus hit the economy – including printing more than $4 trillion to bolster ailing traditional markets.
So a reversal of those policies is seen as a fresh headwind for bitcoin.
There’s also a narrative in the market that bitcoin trades like a risky asset, similar to tech stocks. And the Fed’s hawkish turn could curb appetite for high-risk, high-reward investments.
“Macroeconomic uncertainty has led to relatively low conviction from market players,” analysts at Coinbase Institutional, an arm of the biggest U.S. cryptocurrency exchange, wrote Friday in a weekly update.
The question now is when and where the bitcoin price will find a floor.
As of Friday, the price was down 35% from the all-time high; previous drawdowns have reached levels of nearly 80% and it took the market months to recover.
Some bulls are still betting that the market is on the cusp of a fresh bull run, but analysts for the investment-research firm FundStrat say the market looks to have little near-term price support until it drops down to $39,570 – roughly where the price bottomed in September 2021.
Source: CoinDesk
