Bitcoin (BTC) price has fallen another 7.8% in the past 24 hours to a daily low of $18,420.
Although the dominant cryptocurrency has recovered slightly above $19.2K at the time of writing, this is the second major drop in the past week, which has fallen more than 18% or to the lowest levels not seen since the end of 2020.
The drop came as long Bitcoin spot orders worth $400 million have been liquidated since early Sunday, September 18, posting remarkably high numbers two days in a row, according to data from Coinglass.
With Bitcoin’s dominance dropping to 39.3%, the lowest level since mid-2018, panic spread quickly across the broader digital asset market.
The total value of the crypto market fell to $903.2 billion as major currencies including (ETH), (XRP) and (ADA) posted double digit losses. According to the Crypto Fear and Greed Index, the market is back in the “extreme fear” area, dropping by six points in one day.
Fears of Fed Rate Rally Spur Crypto Crash
Bitcoin’s decline coincided with a broader decline in stock markets, which also fell early Monday as investors await another major interest rate hike announcement from the US Federal Reserve (Fed) on Wednesday, September 21.
Markets fear that the upcoming rate hike could be one of the biggest reasons for the rate hike in history, the largest in the last 40 years. Financial experts predict that the US central bank could raise interest rates by 0.75 percentage points to 3% or even raise them “by an unprecedented full 1 percentage point to 3.25%” to cool the 8.3% inflation rate.
Investors are also wary of news from the Bank of England, which is expected to announce a 0.75 percentage point rate hike on Thursday, September 22nd. In addition, other central banks around the world are on the way to increase interest rates. . Although this move aims to halt historically high levels of inflation, it thus leads to volatility in the financial markets.
Bearish feeling dominates
Contrary to popular expectations of being a safe-haven asset, Bitcoin moves in a positive correlation, or tandem, with stock market prices. This means that the dominant cryptocurrency remains highly reactive to movements in the stock market and the macroeconomic environment, such as global recession fears and monetary tightening.
When looking at Bitcoin options, or investment contracts that give the right to buy or sell an asset at a specified price, sellers dominated the BTC options market at the end of September. On the other hand, September is historically a bearish month for bitcoin prices.
Additionally, the crypto space widely discusses the economists at Goldman Sachs (NYSE:) warning that Bitcoin could drop to new lows of $12,000 if the US central bank aggressively raises interest rates.
on the flip side
- The total number of bitcoins held on all cryptocurrency exchanges has reached an all-time low, according to data from market analysts CryptoQuant. According to them, there were just over 2.3 million bitcoins in circulation today.
- The number of bitcoins held by long-term holders reached a new all-time high of 13.62 million bitcoins last week, showing investors’ desire to hold BTC despite extreme volatility.
- The whales remain interested. Financial giant Fidelity Investment is considering allowing 34 million retail investors to buy Bitcoin via its platform.
- BlackRock (NYSE:), the world’s largest asset manager, is launching Bitcoin Private Instant Trust, an investment vehicle focused on institutional clients in the United States.
Why should you care
The macroeconomic environment remains uncertain and could lead to higher volatility in the short term across the cryptocurrency markets.