According to CoinMarketCap, bitcoin dropped from $23,355 on August 19 to $20,894 on August 20. As the world’s largest cryptocurrency had begun to show signs of revival amid the ongoing winter, surpassing $25,000 for the first time since June, the plunge comes as an anti-climax.
Further, the drop was not restricted to Bitcoin alone. Cardano, Ethereum and Solana (among others) also registered price slippage during the same period. However, the reason for the dip was not immediately known, with experts citing a combination of factors for the downturn.
Some experts point to the correlation between stocks and crypto as one of the reasons for the sell-off. “The S&P 500 rejecting and failing to continue its recovery contributed to bitcoin’s drop,” said Marcus Sotiriou, an analyst at GlobalBlock, in a research note. The S&P 500 has been in the red over the last few days and was down around 1 percent on August 19.
Other experts cited future interest rate hikes as the reason for the BTC downturn. “US equity markets have pulled back since Wednesday’s release of the July Fed meeting minutes, the key takeaway being that the Fed likely won’t be finished with rate hikes until inflation is tamed across the board,” said Simon Peters, crypto market analyst at eToro.
“With the tight correlation between US equities and crypto in recent months, I suspect this has filtered through to crypto markets, and it’s why we are seeing the sell-off,” he explained.
Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown, believes the price slip could be related to whale movement. “It’s not showing the pattern of a flash crash, as the assets didn’t immediately rebound sharply but sank even lower in the hours that followed,” she said. “It seems likely that it was as a result of a large sale transaction, in the absence of other more external factors,” she added.
Such volatility is typical in the cryptosphere. Friday’s sell-off was the second such drop for Bitcoin this year, the first coming on the heels of the Terra meltdown, which saw BTC drop 15 percent. However, expert opinions on the future of the legacy coins are split — some believe it will rise and hit new highs, while others are predicting even lower lows.
On August 14, Peter Schiff, a prominent stockbroker and CEO of Euro Pacific Capital Inc., predicted that BTC would test a support level of $10,000 in the coming days. He was ridiculed and accused of spreading FUD. However, five days later, BTC slipped, and Schiff took to Twitter to reiterate his views.
“In the 5 days since this tweet the price of Bitcoin has fallen by over 14 percent. Those making fun of my tweet should have heeded my warning and sold. There’s still time to sell. Better late than never!” He said in a tweet.
Others mirrored this outlook, warning investors of difficult times ahead. “Feels like $BTC preparing to head back below $20k soon. Don’t get caught off guard,” said crypto enthusiast Ben Armstrong.
Experts also believe that the Russia-Ukraine war, sky-high inflation, and changing monetary policies in the US will most likely continue to affect crypto volatility in the coming weeks and months.
“The market remains vulnerable, and on edge, not necessarily by threats from more crypto projects going bust but from the difficult economic situation we are facing right now,” said Martin Hiesboeck, head of blockchain and crypto research at Uphold. “In other words, the price of bitcoin depends more on the supply of gas to Germany as it does in any crypto-related news or metric,” he continued.
However, crypto markets are cyclical and have a history of bouncing back from crashes. This is why most experts believe in holding digital assets like Bitcoin for the long run. “What I expect from Bitcoin is volatility short-term and growth long-term,” says Kiana Danial, author of “Cryptocurrency Investing for Dummies” and founder of Invest Diva.
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