Bitcoin (BTC) goes back as it struggles to hold over $ 20,000

Bitcoin jumped on Monday, after the cryptocurrency fell below the 2017 high this weekend, but investors stayed on the edge thanks to a number of negative crypto headlines and macro factors that kept pressure on sentiment.

The world’s largest cryptocurrency by market value climbed above the $ 20,000 mark most of the day on Monday. However, it recently fell less than 1% to $ 20,005.46, according to Coin Metrics. Over the weekend, bitcoin fell as low as $ 17,601.58. Meanwhile, the ether rose less than 1% to $ 1,102.86.

While investors will welcome the rise, bitcoin is still 70% below the all-time high, hit in November. It is down 57% so far this year. Many have suggested that a market bottom may be close, but with so much financial uncertainty remaining, bitcoin still has more downside potential, according to Yuya Hasegawa, a crypto market analyst at the Japanese bitcoin exchange Bitbank.

“Bitcoin’s weekend dip was, to put it simply, not deep enough,” he said. “The macro environment has not really changed since last week’s FOMC meeting: there has still been no clear sign that inflation is declining, and the Fed can still drive the economy into recession by raising interest rates too aggressively or simply by fail to tame inflation. “

With bitcoin unable to hold over $ 20,000 convincingly, industry watchdogs said the rally could be short-lived.

Vijay Ayyar, vice president of enterprise development and international at crypto exchange Luno, told CNBC that unless the price of bitcoin closes above $ 23,000 in a daily time frame, “the likelihood is high that this is a dead cat bounce.”

“We are oversold, so a bounce was expected,” he added.

The broader cryptocurrency market has been plagued by a number of problems in recent weeks, which began with the collapse of algorithmic stablecoin terraUSD and the associated token luna.

Attention has now turned to crypto loan companies that promise users high returns for depositing their digital coins. Last week, Celsius, a company with 1.7 million customers and nearly $ 12 billion in managed cryptocurrencies, stopped withdrawing funds from customers, raising concerns that it was insolvent.

Cryptocurrency companies have announced rounds of layoffs in the midst of the market downturn. Coinbase, a cryptocurrency wallet and exchange, said last week that it would cut 18% of full-time jobs. A lending company called BlockFi said last week that it will lay off a fifth of its employees.

Macroeconomic factors including high inflation and forthcoming rate hikes from the US Federal Reserve also weigh on the market.

“When inflation is on the doorstep and with interest rate hikes pending, the risk of a recession around the corner is high,” Charles Hayter, CEO of CryptoCompare, told CNBC via email.

“The pressure me pulls you off higher prices that lose money from homeowners with mortgages means people are psychologically stiffening and reducing back and digital assets suffer as a result.”

“Along with this, the withdrawal of the digital asset ecosystem has revealed a number of systemic problems.”

Given the sharp fall in cryptocurrency prices in recent weeks, some observers said that a bottom in the market may be close.

Giles Keating, director of Bitcoin Suisse, told CNBC’s “Squawk Box Europe” on Monday that “we are close to a point where some of the real redundant influence has now been driven out of the system and a bottom may begin to form. “

Leverage refers to trading where investors effectively use borrowed money to make trades. This means that investors can have greater exposure to positions with less start-up capital. But it is seen as a risky way to trade, as it requires investors to ensure that they have enough capital to meet the so-called margin requirements. If they do not, their position will be automatically terminated. These liquidations are seen as a major factor behind market movements.

Keating said there is still a risk of further liquidation, but he believes most of the sale is over.

“Now some people are warning that we are still not there, and that if we were to break significantly lower, we would see a new wave of liquidations,” Keating said.

“It’s always the risk that hovers there. But my feeling, given that I think the very, very large double-digit returns we saw, in bitcoin, especially in ether, I think it was a sign that many of the really big liquidations are now finished and that the base is really being formed. “