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Crypto Crash 2022: Why Are Bitcoin and Ethereum Down? Should you buy the dip?

Cryptocurrencies were in a bloodbath.

bitcoin BTCUSD,
-3.56%
fell as low as $20,834 late Monday, its lowest level since December 2020 and about 70% below its all-time high set in November. The No. 1 cryptocurrency is trading around $22,407 on Tuesday, which is down 5% in the past 24 hours, according to CoinDesk data.

ether ETHUSD,
-2.16%
plunged as low as $1,075, down 78% from its all-time high.

The chaos is taking place amid a broad sell-off in risky assets. On Monday, the Dow Jones Industrial Average DJIA,
-0.77%
fell nearly 900 points while the S&P 500 Index SPX,
-0.63%
entered a bear market. The Nasdaq Composite COMP,
+0.04%
fell 4.68%.

Additionally, investors are irked by the news that crypto lending platform Celsius has suspended all customer withdrawals and inter-account transfers, just a month after the collapse of the blockchain Terra shook investor confidence in some crypto projects.

Still, most of the crypto crash “has to do with macros, because crypto markets are down since the last CPI number” released on Friday, Gritt Trakulhoon, an investment analyst at Titan, said in an interview. The US cost of living rose 1% in May, pushing inflation to a 40-year high of 8.6%, while showing no signs of slowing.

“I think it’s all macro,” Bill Barhydt, CEO of crypto financial services firm Abra, said in an interview. “We are extremely scared in the markets right now. The market has priced in multiple rate hikes and they have started to price in a severe recession…we are in full risk-off mode on all assets, just as we were in risk-on mode,” Barhydt said.

Anthony Scaramucci, founder and managing partner of SkyBridge Capital, disagreed. “If the US market goes down 3% or 4%, could crypto go down 5% to 7%? Certainly. But I think this outsized drop is a result of the selling pressure Celsius put on the markets,” Scaramucci said. Bitcoin lost 18% on Monday.

Some analysts expect the slide to continue. The next key support is around $19,666, which is close to the 2017 high, according to Michael Boutros, strategist at DailyFX.

Currently, Bitcoin is “trying to form a local bottom between $20,000 and $22,000 with a possible rally towards $26,000, but the likely scenario is that the price will continue to fall below the $14,000 to $17,000 area where a cyclical bottom lies can potentially form,” Abdul Gadit, Zignaly’s chief financial officer and co-founder, wrote in an email.

https://www.marketwatch.com/story/bitcoin-down-70-from-all-time-high-why-is-crypto-market-crashing-11655213410?rss=1&siteid=rss Crypto Crash 2022: Why Are Bitcoin and Ethereum Down? Should you buy the dip?

Brian Lowry

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