Bitcoin, the largest cryptocurrency by market value, tumbled more than 7% on Monday to its lowest since July, as fears of a Russian attack on Ukraine sparked a sell-off of riskier assets.
The largest cryptocurrency trading down 7.4% at $33,650, its lowest since July 24, taking losses from its all-time high of $69,000 hit in November past 50%.
The U.S. State Department said on Sunday it was ordering diplomats’ family members to leave Ukraine in one of the clearest signs yet that American officials are bracing for an aggressive Russian move in the region.
The sooner-than-expected policy rate hike by the US Federal Reserve has fuelled the Bitcoin rally. Investors are keenly awaiting the US Federal Reserve meeting scheduled on January 25-26 for Fed’s signal. To handle the rising inflation, the central bank is likely to tighten policy at a much faster pace than thought a month ago to tame persistently high inflation, a poll by Reuters predicted.
After a rally from $41,000 to $44,000 during the start of last week, Bitcoin plummeted to $34,000 levels over the last couple of days with the strengthening of the US dollar. On the daily timeframe, Bitcoin has broken down from the descending channel pattern. Key support is expected at the $30,140 level.
The RSI has reached its lowest in 2 years which indicates that BTC is in the extreme oversold zone. All these factors amount to a certain reversal in the crypto markets,” said WazirX trade desk.
Ether price, however, jumped in the last 24 hours. The world’s second-largest cryptocurrency price climbed 0.36 percent to $2,432 on January 24, according to CoinMarketCap. On Ether price, WazirX trade desk said, “Ethereum slid to $2,300 and other Altcoins followed suit taking a huge beating.
The latest round of sell-off comes after Goldman Sachs predicted a faster pace of Fed tightening if inflation continues to rise. The heightened geopolitical tensions between U.S. and Russia could be adding to bearish pressures around risk assets, in general.
“We see a risk that the [Federal Open Market Committee] will want to take some tightening action at every meeting until the inflation picture changes,” Goldman economist David Mericle noted in Saturday’s client note, according to CNBC.
The investment bank has penciled in four-quarter percentage point rate hikes for this year while the Fed fund futures are priced for nearly five rate hikes.
Most commentators have tipped the first hike in borrowing rates in March followed by three more rate rises at subsequent quarterly meetings.
Cryptocurrencies have skidded on the prospect of a reduction in the Federal Reserve stimulus that buoyed speculative assets through the pandemic. More than $1 trillion has been erased from digital coins since a November high. Bitcoin resumed declines on Monday, falling 2.5% to $34,614 at 5:21 pm in Hong Kong.
Chris Weston, head of research with Pepperstone Financial Pty Ltd., said the sector is “grossly oversold but momentum is to the downside and rallies are likely to be sold.”
BCA’s Berezin is skeptical about Bitcoin overall even as he sees the possibility of a short-term boost should stock recover. His long-term target for it is just $5,000. Investors seeking to hedge risk should consider going long on Cardano, Solana, and Polkadot versus Bitcoin, Litecoin, and Dogecoin, he said.
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