Key facts:
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The price of bitcoin fell almost 15% so far today, reaching below $23,000.
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The increase in inflation and interest rates in the US, as well as Europe, was the straw that broke the camel’s back.
The price of bitcoin (BTC) depreciated almost 15% this Monday, in the face of an accentuated wave of massive sales that began three days before. On Friday, the cryptocurrency fell from the minimum band of USD 29,000 in which it had remained for twelve days. Since then, it went into freefall until it hit $22,800 this morning, its lowest point in 18 months.
How was it predicted by analyststhe drop comes as fear grows in the market after the discouraging global economic context. The price of bitcoin declined after the United States government announced at the end of the week a year-on-year inflation increase of 8.6%its maximum in 41 years.
Similar to the United States, Europe registers an inflation of 8.1%, its highest peak in 39 years, which is why last week it reported that will raise interest rates. In this way, the old continent joins the American power that had already applied this measure to respond to the price increase.
Such announcements, added to the advance of the Russian war against Ukraine and the probability of a global recession, have caused investors to react by selling their funds in the cryptocurrency. In this way, the movement caused its price to decline and could even take it to lower prices in the coming days, as is currently happening in the stock market.
Uncertainty over bitcoin price fuels sell-off
The trader Eduardo Gavotti recently commented to CriptoNoticias that in times of economic instability like the current one, investors move away from risky assets. This way of acting affects both the cryptocurrency market, as well as the stock market. Reason why both started today in the red, as has been happening during 2022.
Also, there are whales (large investors) that could sell their bitcoins further driving the price drop. This is feared, out of pure speculation, because some organizations have loans collateralized in their BTC that are close to reaching their settlement price. This happens for example with MicroStrategy and Celsius, according to communicated Specialist Mike Burgersburg.
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That means such whales will have to either add funds as collateral or sell their bitcoins. The second option could generate a domino effect on the cryptocurrency by driving it to lower prices. However, it is worth clarifying that it is unlikely that the sale of BTC is a MicroStrategy strategy, given that Michael Saylor, its CEO, already public today on his Twitter that he trusts bitcoin, showing his bullish conviction as usual.
Likewise, In this scenario, platforms such as Celsius y Binance halted bitcoin withdrawalswhich raises mistrust and panic among some users. This confluence of factors feeds fear among investors, promoting their sales until buyers manage to reverse the movement.
Fear rises slightly in the bitcoin market
According to the index of Fear and Greedmarket sentiment right now is maintains with “extreme fear” on a scale of 11 out of 50 since last night. This figure implies a drop of 2 points compared to the previous report, which reflects a slight worsening of this fear that has characterized this year’s bear market.
It is crucial at times like this not to make impulsive decisions and to maintain the trading strategy so as not to get into unwanted situations.. Scenarios like this must be foreseen in a risk plan to avoid surprises and manage emotions.
That is why long-term bullish sentiment remains among holding enthusiasts, despite the fact that there is no guarantee of its rise and predictions for the near future remain bearish.