Should you be afraid? By DailyCoin

© Reuters Bitcoin (BTC) Hits Two-Year Low: Should You Be Scared?

Bitcoin’s (BTC) price fell another 7.8% in the last 24 hours to a daily low of $18,420.

Although the dominant crypto had recovered just above $19.2K at the time of writing, this is the second significant decline in the past week, falling by more than 18% or to lows not seen since late 2020.

The decline came as nearly $400 million worth of Bitcoin long spot orders have been liquidated since early Sunday, September 18, recording significantly high numbers for two consecutive days, according to data from Coinglass.

As Bitcoin dominance fell to 39.3%, its lowest level since mid-2018, panic quickly spread across the broader digital asset market.

The total value of the crypto market fell to $903.2 billion as major coins including (ETH), (XRP) and (ADA) recorded double-digit losses. According to the Crypto Fear and Greed Index, the market returned to “extreme fear” territory, falling by six points in a single day.

Fear of interest rate hikes catalyzes crypto crash

Bitcoin’s fall coincided with the broader decline in equity markets, which also fell early Monday as investors await another major interest rate hike by the US Federal Reserve on Wednesday, September 21.

The markets fear that the upcoming interest rate hike could be one for the history books as the biggest in the last 40 years. Financial experts predict the US central bank could raise interest rates by 0.75 percentage points to 3% or even raise them “by an unprecedented full percentage point to 3.25%” to cool inflation at 8.3%.

Investors are also dreading news from the Bank of England, which is expected to announce its rate hike of 0.75 percentage points this Thursday, September 22. In addition to that, other central banks around the world are also on their way to raising interest rates. Although the move is said to be aimed at stopping the historically high levels of inflation, it consequently brings volatility to the financial markets.

Bearish sentiment dominates

Contrary to popular expectations of being a safe haven, Bitcoin moves in positive correlation, or in tandem, with stock market prices. This means that the dominant crypto remains highly reactive to stock market movements and the macroeconomic environment, such as fears of global recession and monetary tightening.

When looking at Bitcoin options, or investment contracts that give the right to buy or sell an asset at a specific price, sellers dominate the BTC options market at the end of September. On the other hand, September has historically been considered a bearish month for Bitcoin prices.

In addition to that, the crypto space is widely discussing Goldman Sachs (NYSE: ) economists’ warning that Bitcoin could potentially fall to new lows of $12,000 if the US Federal Reserve raises interest rates sharply.

On the other side

  • The total number of Bitcoins held on all crypto exchanges has reached the lowest levels in history, according to data from market analysts CryptoQuant. According to them, there were a little more than 2.3 million bitcoins in circulation today.
  • The number of bitcoins held by long-term holders hit a new all-time high of 13.62 million bitcoins last week, showing investors’ willingness to hold on to BTC despite severe volatility.
  • Whales are still interested. Financial giant Fidelity Investment is considering allowing 34 million retail investors to buy Bitcoin through its platform.
  • The world’s largest asset manager, BlackRock (NYSE: ), is launching a spot Bitcoin private trust, an investment vehicle focused on institutional clients in the United States.

Why you should care

The macroeconomic environment remains uncertain and could trigger higher short-term volatility across crypto markets.

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