Bitcoin has been falling as cryptocurrency firms default under the mounting pressure of the Fed’s rising interest rates.
Driving the news: On Thursday morning, the bitcoin dropped to $19,000, close to a 5% plunge in the last 24 hours. Other currencies like Solana, Ethereum and Dogecoin have also fallen in value.
What they’re saying: Per Insider, Fairlead Strategies’ founder Katie Stockton said in a note that Bitcoin should be decisively held between an $18,300 to $19,500 range to avert a future decline.
- “Bitcoin has stabilized after a reaction to short-term oversold indications last week, supporting a short-term neutral bias within a bearish long-term trend,” Stockton said.
Analysts at cryptocurrency exchange Bitfinex said: “A narrative that could well play out for the rest of the year and beyond is guiding bitcoin lower today, one of looming recession and mushrooming levels of inflation,” per CNBC.
Background: The Federal Reserve is in the process of setting up the biggest interest rate hike in almost 30 years. Last month’s 0.5% hike was raised by another 0.5% increase — “an aggressive strategy to increase the price of debt, slow spending and rein in record high inflation,” as Art Raymond reported for the Deseret News.
The cryptocurrency sector is taking the punches as coin exchanges defaulted, per Blockworks.
- First, Celsius, a major cryptocurrency lending platform, paused withdrawals, swaps and transfers on the platform due to the market conditions in mid-June.
- This led to Three Arrows Capital, a crypto hedge fund, facing insolvency after it was ordered to liquidate $400 million.
- Babel Finance and Binance also paused withdrawals during that time.
- A week later, cryptocurrency broker Voyager Digital reveled that it was trying to recover about $657 million loaned to Three Arrows.
What’s next?: Vijay Ayyar, vice president of corporate development and international at cryptocurrency exchange Luno, told CNBC that the next installment of the interest rate hike by the Fed will continue to “weigh down all risk assets.
“Most bounces are being sold off for the past few weeks, typically categorized as bear market bounces, aiming to trap late buyers, only to have them sell off positions lower,” Ayyar said.