- Bitcoin broke below $20,000 for the first time since December 2020, while Ethereum fell below $1,000.
- It is the first time that Bitcoin has fallen from its highest level in the previous cycle. Bitcoin crossed $19,600 in December 2017 and is now trading lower.
- Several factors are contributing to the latest cryptocurrency sell-off, as some of the biggest cryptocurrency companies have been affected by tough market conditions.
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Ethereum crashes below $1,000 as Bitcoin drops.
Bitcoin and Ethereum Expand Losses
Bitcoin and Ethereum continue to decline as the cryptocurrency continues to decline.
The highest crypto asset broke below $20,000 for the first time since December 2020 early Saturday, trading at $19,052 on Coinbase. Since then, it has recorded a slight recovery to $19,272 per CoinGecko data.
Bitcoin’s failure to hold $20,000 is significant because it has historically been an important support level. Bitcoin held over $20,000 for the entirety of the 2021 rally, having topped $69,000 in November 2021. It’s now more than 70% of its all-time high.
In previous downtrends, bitcoin has always stayed above the high of the previous bullish cycle. For example, it crossed $1,000 in 2013 and traded in four figures throughout the entire 2017 rally and subsequent winter. In December 2017, the explosion peaked at about $19,600. Following today’s price action, Bitcoin broke a major trend by dropping below the previous session’s high.
The second cryptocurrency, Ethereum, has also done poorly in the market lately. Ethereum fell below $1,000, another important psychological trading level, early Saturday as bitcoin collapsed, and is currently trading at $995. It is currently on track to close out its eleventh consecutive week in the red.
Several factors contributed to the lack of momentum in the cryptocurrency market. This week saw Celsius’ client withdrawals frozen as it grappled with insolvency issues, before Three Arrows Capital, one of the most respected hedge funds in the space, entered its own liquidity crunch. The hedge fund run by Su Zhu and Kyle Davies previously held more than $10 billion in assets under management and is now rumored to be on the verge of bankruptcy after a series of margin calls due to excessive leverage trading during a market downturn. Babel Finance, a lending platform focused on institutions, has also halted withdrawals due to low liquidity.
The recent decline comes on the back of an unstable macroeconomic environment that has seen the Federal Reserve commit to raising interest rates throughout this year while battling rising inflation. Federal Reserve Chairman Jerome Powell announced another 75 basis point increase this week, posing another threat to risky assets such as cryptocurrencies. Economists around the world are predicting a global recession, which could cause more problems for investors.
After the drop today, the global cryptocurrency market cap has reached around $866 billion. This is a 71% decrease from the peak that occurred just eight months ago.
Disclosure: At the time of writing, the author of this article owns ETH and several other cryptocurrencies.
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