Bitcoin Suffers Largest Single Day Drop Since 2020
The price of Bitcoin (BTC) has dropped by almost 30% in the last 7-days. The number one crypto by market cap dropped below critical support as macro-economic conditions worsen for risk-on assets. The general trend across global markets seems to point to the downside.
Related Reading | Bitcoin 3-day Chart Indicates March 2020 Crash Recurrence
At the time of writing, Bitcoin trades at $22,400 with a 4% loss on lower timeframes. The downside price action is on pair with losses last seen in March 2020.
At that time, the crypto market and traditional market crashed due to the spread of COVID-19 and the lockdown measures imposed by world governments to slow it down. The two-year pandemic shutdown economic activity for certain sectors favored the increase in global liquidity.
The latter was caused by central banks around the world. In order to prevent the global economy from crashing, these financial entities expanded their monetary supply.
Thus, there was more money to buy things. A portion of this money fled into the crypto market, and what once a March 2020 crash became a March 2021 rally when the price of Bitcoin soared beyond $40,000 on route to an all-time high at $69,000.
As BTC’s price and other risk-on assets trended to the upside, and central banks printed more money, inflation skyrocketed and reached a 40-year high on the U.S. dollar. The U.S. Federal Reserve (FED) is trying to stop inflation, and risk-on assets are paying the price.
According to trading desk QCP Capital, the current downside price action was triggered by inflation surpassing expectations from market participants and increased fear as the FED could turn more aggressive on its monetary policy.
As QCP claimed, the FED has been hinting at a hawkish approach, what’s going to happen to Bitcoin and global markets if they decide to deliver it? The S&P 500 and the Nasdaq index are already trading at support:
There are talks of a 75 bps hike at the FOMC meeting this Wednesday. Both the S&P and NASDAQ have also broken below last month’s low.
Bitcoin Impacted By Cascade Of Bearish News
In addition to macro-conditions, the crypto market seems to be taking a hit from a series of bad news. The sector was barely recovering from the Terra (LUNA)-UST debacle when Binance, Coinbase, and other major companies.
The latest was Celsius, the U.S.-based crypto lender company which stop all withdrawals from its users. The company apparently fell into insolvency as the price of Bitcoin and other largest cryptocurrencies dropped below $24,000.
Related Reading | Ethereum Drops Below $950 On Uniswap Overnight – Here’s Why
In that sense, QCP Capital believes $20,000 will operate as critical support for BTC’s price and $1,150 for Ethereum. If these levels fail, the crypto market could reverse its two years gains and return to its pre-COVID levels. This is already happening in traditional markets.