The bitcoin sell-off is intensifying amid broader market turmoil . Bitcoin fell below $19,000 for the first time since Independence Day. The last time the asset fell below $19,000 was on July 4, when it touched $18,600.
Investors seem to be dumping Bitcoin for a variety of reasons. As usual, the asset’s sell-off has been closely linked to U.S. stocks: stocks fell today after choppy trading – in part on fears that the Federal Reserve will keep raising interest rates. The Federal Reserve has kept interest rates high to combat 40 years of high inflation, leading investors to sell riskier assets such as stocks and bitcoin.
On September 6, Bitcoin fell from $19,820 to $18,960 in less than two hours. The move led to $74 million in bitcoin futures liquidations on derivatives exchanges, the largest in nearly three weeks.
Bitcoin rose 2% to $20,200 in the early hours of Sept. 6, but the move was quickly subdued, with Bitcoin falling back to around $19,800 within an hour.
Markets have been in a slump since Fed Chairman Jerome Powell’s comments on Aug. 27, followed by a one-day loss of $1.25 trillion in U.S. stocks. Powell said bigger rate hikes were still on the table, sending the S&P 500 down 3.4% on the day.
Professional traders have been bearish since last week
Quarterly futures are generally avoided by retail traders due to price differences from the spot market. Nonetheless, they remain the tool of choice for professional traders because they prevent the volatility of funding rates that often occurs in perpetual futures contracts.
In a healthy market, the indicator should trade at an annualized premium of 4% to 8% to cover costs and associated risks. Therefore, it is safe to say that derivatives traders have remained neutral or bearish over the past month as the Bitcoin futures premium has remained below 3%. The data reflects the reluctance of professional traders to increase leveraged long positions.
A $2,500 drop in bitcoin price on Aug. 18 resulted in liquidation of $210 million worth of leveraged longs (buyers). Still, the prevailing bearish sentiment does not necessarily translate into unfavorable price action. Therefore, investors should be cautious when whales and market participants are less inclined to add leveraged long positions and use options to provide downside protection.
Bitcoin’s next target is $15,000
From a technical standpoint, Bitcoin could drop to $15,000 or below in the coming weeks.
A “bear flag” forms when prices consolidate higher within a parallel ascending range following a strong downtrend. Bitcoin has entered the so-called breakdown phase of its bear flag pattern with a downside target lurking below $15,000, as seen in the chart above.
The Fed has raised interest rates four times in a row in 2022, raising the benchmark rate to a range of 2.25%–2.5%. Those rate hikes have boosted interest in cash securities over riskier assets like bitcoin.
For example, Bank of America with savings accounts offers customers an annual yield of 2% or more, compared with about 0.5% at the start of the year, according to BankRate.com.
Meanwhile, mutual funds with $2.7 trillion in equity under management added $208 billion to their cash holdings in the first half of 2022, the fastest allocation to date, according to an analysis by Goldman Sachs .
Broader demand for cash helped the U.S. dollar index, which measures the greenback’s strength against major foreign currencies, climbed to 110.55 on Sept. 6, its highest level since 2002. As a result, cash will outperform stocks, bitcoin, ethereum , and other assets by a wide margin in 2022.
“Each failed attempt (a break above the $20,000 resistance zone) increases the likelihood of a test of the bottom of the price range near $18,000,” Joe DiPasquale, CEO of crypto hedge fund manager BitBull Capital , told CoinDesk .
The S&P 500 fell 0.41% on Tuesday as traders worried that the Federal Reserve could keep pushing down U.S. inflation. Bitcoin tends to fall when speculation about more hawkish monetary policy intensifies.
Bitcoin’s 30-day average volatility — a measure of how much its price fluctuates over a period of time — has fallen to 2.7% from over 4% in early July, according to data firm Coinglass.
Even during the most volatile months of the sluggish “crypto winter”, the figure has remained below 5% in 2022 – unlike the past five years, even during periods of low volatility, There will also be a surge of up to 7%.
Likewise, the CryptoCompare index , which uses bitcoin futures contracts to calculate expected price changes, is now just above 77, down from more than 90 at the start of the year.
Bitcoin has experienced periods of reduced volatility in the past, usually during periods of price slumps or declines, and its price volatility tends to pick up as trading activity increases.
This time, though, may be different.
“It’s been a relatively long period of declining volatility, now even more than anything we’ve seen in 2019,” said Stéphane Ouellette, CEO of the cryptocurrency derivatives provider.
Author: Amy Liu
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/market-turmoil-intensifies-bitcoin-falls-below-19000-for-the-first-time-in-two-months/
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