Bitcoin price in freefall as Fed doubles down on interest rate hikes
Despite the drops, analysts believe Bitcoin will not slip below AUD$30.5K (US$21K) anytime soon.
- The total market capitalisation of the cryptocurrency sector has slipped below US$1 trillion for the first time since January 2021.
- Bitcoin's share of the crypto market currently stands at 43%.
- Since the start of the year, the S&P 500 has lost more than 20% of its value.
Bitcoin has been hit with financial bloodbath over the last 72 hours, with the digital currency dropping from AUD$40,800 to AUD$30,500 before forging a small recovery. BTC's weekly losses now stand at -30% while trading at AUD$31,352.
The ongoing downturn comes amid markets across the board crashing hard. the S&P 500, US' benchmark stock index, has dropped by more than 21% since the start of the year, leading many prominent analysts to claim that a recession may be coming.
Billionaire hedge fund guru Leon Cooperman believes that the global economy will enter into a period of heavy recession sometime during 2023, with the S&P 500 suffering a total valuation drop of 40%. Cooperman told CNBC:
"I think we're going to go through a prolonged period of low returns as we try to right the ship. I believe we have gone through one of the most speculative periods … crypto and non-fungible tokens and stuff like that."
After having initiated a host of quantitative easing (QE) measures this year, the Federal Reserve announced yesterday that it was embarking on one of its fastest interest rate hike cycles in its history, primarily to curb rising inflation figures.
Has Bitcoin reached its price bottom?
Mike Novogratz, CEO of digital asset merchant bank Galaxy Digital Holdings, said that Bitcoin is fast approaching its bottom around the AUD$29–$30.5K (US$20–$21K) range. In his view, the crypto sector could bottom out before the US equities market, which will most likely fall by another 15–20%. He added:
"Bitcoin is around US$20,000, $21,000 and it is $23,000, so you are much closer to the bottom in crypto than you are where I think. Ethereum should hold around US$1,000 and it's US$1,200 right now."
Prominent investor and crypto market pundit Raoul Pal believes that the ongoing market downturn suggests that Bitcoin is finally reaching a "sell-off threshold", adding that the digital asset is now in the "buy zone". Pal along with Anthony Scaramucci, founder of Skybridge Capital, believe that investors should use this slump as an opportunity to add Bitcoin and Ethereum to their portfolios. Scaramucci noted:
"Truth be told, people will look back on this debacle and wish they had fresh cash to buy into BTC and ETH."
What lies ahead for Bitcoin?
Bitcoin may be close to reaching its lowest local price level, with its relative strength index (RSI) currently at 31. The metric is inching closer to the 28 mark, its lowest ever reading. The RSI is a popular tool used by many experts to measure the speed and magnitude of an asset's value swings, indicating overbought or oversold conditions. When the metric slips below 30, it suggests that the asset is undervalued or being sold way more than it should be.
Disclosure: The author owns a range of cryptocurrencies at the time of writing.
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