Following a decline in stock markets around the world and the continued strength of the US dollar, Bitcoin traded below $19,000 on Wednesday morning, reaching its lowest level since June.
Due to a sell-off in all digital coins, the market value for all cryptocurrencies also decreased below $1 trillion.
According to Coin Metrics, Bitcoin was last trading slightly lower at about $18,823.94. Ether was down more than 2 per cent at $1,535.49. Its gains in recent months have far outpaced those of bitcoin.
With tighter monetary policy, central banks around the world are battling rogue inflation. The US Federal Reserve has raised interest rates a total of 2.25 percentage points in a series of moves. Markets anticipate continued interest rate increases.
The Fed’s tightening of monetary policy has made the dollar stronger, which has hurt risky assets. The yield on the 10-year US Treasury has also increased.
Since stocks and bitcoin have historically traded in tandem, if stocks decline, bitcoin generally does too.
“The macro environment also continues to prove difficult with the dollar continuing to put in highs. This impacts all risk assets as we can see,” Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, told CNBC.
“If we see the dollar start to move back down, then we should be able to get risk assets such as bitcoin move back up again.”
Since its peak in November, nearly $2 trillion of the value of the cryptocurrency market has been lost. Bitcoin has fallen by about 60% from its November record high of $68,990.90.
A challenging environment for risk assets as well as problems unique to the cryptocurrency sector, such as failed projects and widespread bankruptcies, have contributed to the sell-off.
Since June, the price of bitcoin has fluctuated only between $18,000 and $24,000. Bitcoin “typically likes to go back and test previous lows to see if they hold as support,” according to Luno’s Ayyar, when forming a bottom.
Unless bitcoin drops below $17,500, he claimed, the market is likely consolidating between $18,000 and $24,000.
Ether and other so-called altcoins, or alternative coins, have managed to rise above bitcoin during this time. Since both cryptocurrencies hit a low in June, ether has outpaced bitcoin.
The native cryptocurrency of the Ethereum network is called ether. This month, Ethereum will undergo a significant upgrade known as “the merge” that its supporters claim will increase network efficiency, attract new investors, and result in higher returns.
“Ethereum hit yearly highs against the bitcoin pair in anticipation of the merge,” Ayyar said. ” Hence there has been a lot more interest and activity in the Altcoin space, while Bitcoin consolidates.”
(Adapted from Bloomberg.com)