Bitcoin price plunges below $20,000 as interest rate hike worries weigh on risk assets

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(Kitco News) – It was a mixed day in terms of price action across the cryptocurrency market on Wednesday, as traders continued to digest the previous day’s pullback after a warmer-than-expected inflation report sent global financial markets tumbling.

Bitcoin (BTC) bulls defended the psychologically significant support at $20,000 through early trade, but were overwhelmed by a bearish onslaught in the afternoon session, resulting in BTC falling to a daily low of $19,629.

BTC/USD 4-hour chart. Source: TradingView

This increase in volatility to the downside was highlighted as a possibility by Kitco senior technical analyst Jim Wyckoff, who noted that “Price action is now sideways and choppy as the bulls and bears are on an even technical playing field in the near term” in his morning Bitcoin update.

Going forward, Wyckoff warned that “A drop in prices below chart support at the September low would give the bears new impetus to suggest another leg down in prices,” while “A move in prices above chart resistance at this week’s high would recharge bulls, to suggest further gains.”

Despite the sudden pullback in the price of BTC, the underlying fundamentals of the network continue to improve. On Tuesday, Bitcoin mining difficulty climbed 3.45% to hit a new record high of 32.05T, according to BTC.com data.

The increase in difficulty follows the new record high hash rate of 264.8 Ehash/s, which the network recorded on September 4th.

Prepare for The Merge

Wednesday’s pullback in BTC dampened excitement for the Ethereum (ETH) Merge, which Google’s countdown clock predicts will take place around 1:40am EST at the time of writing.

The merger and its effect on the wider market has been a hot topic of discussion in recent months, with many warning that it will be a ‘buy the rumour, sell the news’ type, while others feel it will help start a bull market rally.

So far, it looks like the former is likely to be true, as the market is showing few signs that a higher rally is imminent.

This view was supported by comments from Edward Moya, senior market analyst at OANDA, who said that while “Ethereum’s merger should be a pivotal moment for the crypto landscape, its current weakness is more likely to reflect investor expectations that we will see a classic” sell event response when the merge is complete.”

Moya also pointed to the possibility that the current weakness could be affected by profit-taking by hedge funds that had been playing the merger narrative in recent months.

As for how the Ether price will fare against Bitcoin going forward, Moya suggested that “Ethereum will likely continue to grab Bitcoin’s lead as the top crypto, but the chances of a turnaround will have to wait a few more years.”

Altcoins slide lower

It was pretty much a red day in the altcoin market as Bitcoin’s afternoon plunge below $20,000 crushed any momentum that existed. At the time of writing, Ether is trading down 0.28% on the 24-hour chart and is trading at a price of $1,586.

Daily performance in the cryptocurrency market. Source: Coin360

The biggest winners of the top 200 coins, according to data from CoinMarketCap, are Ravencoin (RVN), which climbed 19.17% to reach a peak of $0.0737, followed by an 18.48% increase for Conflux (CFX) and a 17.65% increase for Celsius (CEL).

The total cryptocurrency market cap is now $981 billion, and Bitcoin’s dominance rate is 38.7%.