Experts Blame Crypto Volatility, US Stocks Fall for Recent Bitcoin Crash
Of CNBCTV18.com IST (published)
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Some experts point to the correlation between stocks and crypto as one of the reasons for the Bitcoin selloff. Other experts cited future interest rate hikes as the reason for the BTC decline. Find out more here-
Bitcoin fell more than 10 percent in less than 24 hours, falling from $23,355 on Aug. 19 to $20,894 on Aug. 20, according to data from CoinMarketCap. The move comes as an anti-climax for many, especially as the world’s largest cryptocurrency had started to show signs of revival amid the ongoing winter, passing $25,000 for the first time since June.
Furthermore, the decline was not limited to Bitcoin alone. Cardano, Ethereum and Solana (among others) also recorded price slippage in the same period. However, the reason for the decline was not immediately known, and experts cited a combination of factors for the decline.
Some experts point to the correlation between stocks and crypto as one of the reasons for the selloff. “The S&P 500 rejecting and failing to continue the recovery contributed to bitcoin’s fall,” Marcus Sotiriou, an analyst at GlobalBlock, said in a research note. The S&P 500 has been in the red in recent days and was down around 1 percent on 19 August.
Other experts cited future interest rate hikes as the reason for the BTC decline. “US equity markets have retreated since Wednesday’s release of the July Fed meeting minutes, the bottom line being that the Fed is unlikely to be done with rate hikes until inflation is tamed across the board,” said Simon Peters, crypto market analyst at eToro.
“With the tight correlation between US stocks and crypto over the past few months, I suspect this has filtered through to the crypto markets, which is why we’re seeing a selloff,” he explained.
Susannah Streeter, a senior investment and market analyst at Hargreaves Lansdown, believes the price drop may be related to whale movement. “It doesn’t show the pattern of a flash crash, as assets didn’t immediately rebound sharply, but sank even lower in the hours that followed,” she said. “It seems likely that it was the result of a large sales transaction, in the absence of other more external factors,” she added.
Such volatility is typical in the cryptosphere. Friday’s selloff was the second fall for Bitcoin this year, the first coming on the heels of the Terra meltdown, which saw BTC fall 15 percent. But expert opinions on the future of the old coins are divided – some believe it will rise and reach new heights, while others predict even lower lows.
On August 14, Peter Schiff, a prominent stockbroker and CEO of Euro Pacific Capital Inc., predicted that BTC would test a support level of $10,000 in the coming days. He was ridiculed and accused of spreading FUD. But five days later, BTC fell, and Schiff took to Twitter to reiterate his views.
“In the 5 days since this tweet, the price of Bitcoin has dropped over 14 percent. Those making fun of my tweet should have heeded my warning and sold. There is still time to sell. Better late than never!” he said in a tweet.
Others mirrored this view, warning investors of difficult times ahead. “Feels like $BTC is preparing to go back below $20k soon. Don’t be caught off guard,” said crypto enthusiast Ben Armstrong.
Experts also believe that the Russia-Ukraine war, skyrocketing inflation and changing monetary policy in the United States will most likely continue to affect crypto volatility in the coming weeks and months.
“The market remains vulnerable and on edge, not necessarily from threats from more crypto projects going bankrupt, but from the difficult economic situation we’re facing right now,” said Martin Hiesboeck, head of blockchain and crypto research at Uphold. “In other words, the price of bitcoin depends more on the supply of gas to Germany, as it does in any crypto-related news or calculations,” he continued.
However, crypto markets are cyclical and have a history of recovering from crashes. This is why most experts believe in holding digital assets like Bitcoin for the long term. “What I expect from Bitcoin is volatility in the short term and growth in the long term,” says Kiana Danial, author of “Cryptocurrency Investing for Dummies” and founder of Invest Diva.
