Bitcoin Slumps Below $20,000. Market Fear Springs
For the longest stretch of days since the cryptocurrency market was shaken by unrest in July, Bitcoin has dropped below US$20,000 for a sixth straight trading session.
On Thursday, the value of the biggest cryptocurrency dropped as much as 3.1% to $19,577.
Bitcoin In Free Fall
The largest cryptocurrency by market capitalization has been in free fall for the previous ten days as concerns over Wednesday’s FOMC minutes drove its price below $20,000. Despite the recent decline, investors seem to be increasing their Bitcoin purchases, and certain key on-chain data indicate that the price may be getting ready to emerge from its most recent low.
Market Analyst Jim Wyckoff foresaw the increase in volatility and cautioned in his morning Bitcoin brief that “quieter sideways trading continues, but probably not for much longer. History demonstrates that the financial markets can experience volatility in September.
BTC/USD trades at $20k. Source: TradingView
Wyckoff predicted that it might last for some time as long as bears continue to outnumber bullish traders.
“In the immediate future, expect increased cryptocurrency volatility. To break the price decline that is still visible on the daily chart for bitcoin, albeit narrowly, bulls need to demonstrate greater strength, according to Wyckoff.
Bitcoin average funding rates. Source: Santiment
The cryptocurrency analytics company Santiment, which published the following chart displaying the increase in BTC average funding rates, revealed that the sentiment against Bitcoin is still unfavorable.
Fear Overtakes Hope
Less than US$1 trillion, or roughly a third of its peak market value reached in November, is now the size of the cryptocurrency industry. Coin values were shaken midyear by the collapse of the Terra ecosystem, the demise of Three Arrows Capital, the bankruptcy of broker Voyager, and the failure of lender Celsius after coming off the highs amid a general increase in risk aversion.
Stephane Ouellette, chief executive of FRNT Financial Inc. said:
“There is a lot of fear that if we make new lows on BTC (as a proxy for the market), there will be another wave of crypto company defaults.”
The fall on September’s first day is unfavorable for the bellwether currency. Since 2017, every September has seen a decline in the price of Bitcoin, making it traditionally one of the worst months of the year. According to Bespoke Investment Group, over the past five years, the monthly decline in the value of Bitcoin has averaged 8.5%.
The overall cryptocurrency market cap now stands at $967 billion, and Bitcoin’s dominance rate is 39%.
Featured image from UnSplash and chart from TradingView.com, Bloomberg, and Santiment