The current market situation is believed to be a repeat of the post-2016 halving event that saw Bitcoin hitting an all-time high of nearly $19,000 in December 2017, then falling from that height to $3000 within a space of two years.
Bitcoin has experienced a massive pullback from the $69,000 all-time high since late last year. The asset recently broke a key support point to trade below $31,000 for the first time since mid-last year. Interestingly, the market could not respond to a rebound as the price dropped even further. In Asia trading Monday, Bitcoin recorded its lowest since December 2020 after falling by 8.9% to trade as low as $24,900. As of press time, the asset has recovered a little of its lost value to trade at $25,300.
The mass sell-off has affected altcoins with Ethereum falling by 8% in the last 24 hours to trade at $1333. Solana is trading at $28 and has fallen by 12% in the last 24 hours. Tron has also fallen by 16% to trade at $0.06. The MVIS CryptoCompare Digital Assets 100 Index has as well recorded a near 10% drop. According to Antoni Trenchev, co-founder and managing partner of crypto lender Nexo, the current market struggles disclose the type of macro-environment and the level of fear crypto is facing.
“Cryptos remain at the mercy of the Fed and stuck in a merry dance with the Nasdaq and other risk assets. We’re hearing Bitcoin forecasts in the mid-teen and single-digit thousands which tells you the type of macro environment crypto is facing for the first time – and the levels of fear,” he said.
The market pullback has largely been linked to the unprecedented rise of the US Inflation. In May, the inflation hit a 40-year high, with the Federal Reserve expected to introduce a series of more aggressive interest rate hikes. Its effect in the crypto market has possibly triggered the mass sell-off. Investors’ confidence is already low after the Terra ecosystem crash saw hundreds of people losing millions of their investments.
Trenchev, in his statement, cautioned that the outlook of other altcoins could become even bleaker if Ethereum drops to around $1200, which is the 200-week moving average. Rick Bensignor, president of Bensignor Investment Strategies and a former strategist at Morgan Stanley also suggests that it is important to be “a buyer here” on Bitcoin futures.
“But if you do get long, perhaps think about doing so with either a long call spread or short put spread to limit risk. If this dives, there’s no reliable support nearby,” he said.
The current market situation is believed to be a repeat of the post-2016 halving event that saw Bitcoin hitting an all-time high of nearly $19,000 in December 2017, then falling from that height to $3000 within a space of two years. However, the 2018-2019 pullback was triggered by massive crypto crackdowns in China.
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