The world’s largest digital token dropped by as much as 8.9% to USD 24,903.49 – its lowest since December 2020. Other cryptocurrencies also weakened as a broader sell-off continued. The MVIS Crypto Compare Digital Assets 100 Index, which estimates 100 of the top tokens, fell as much as 9.7%.
Antoni Trenchev, co-founder and managing partner of crypto lender Nexo was quoted as saying that cryptos remain at the mercy of the Fed and are stuck in a merry dance with the Nasdaq and other risk assets. The business is hearing Bitcoin forecasts in the mid-teen and single-digit thousands which is indicative of the type of macro environment crypto is facing for the first time and the levels of fear in the market.
Traders are enhancing bets for a more aggressive pace of Federal Reserve tightening after Friday data showed US inflation soared to a fresh 40-year high in May. Cryptocurrencies, which have grappled amidst the Fed’s policy in recent months, have been hit particularly hard. The collapse of the Terra/Luna ecosystem last month, and lender Celsius pausing withdrawals on Monday morning, have further battered confidence in the space.
Rick Bensignor, president of Bensignor Investment Strategies and a former strategist at Morgan Stanley said that he would typically suggest being a buyer of Bitcoin futures.
Other coins were also having a difficult time, with Ether off as much as 12% to its base level since February 2021. Avalanche plummeted as much as 15%, Solana up to 14% and Dogecoin as much as 11%.
Trenchev stated that if Ethereum continues to bleed toward USD 1,200 (the 200-week moving average) the outlook for other altcoins would become even bleaker.
Why is Bitcoin volatile?
Bitcoin has not only been a trendsetter, steering in a wave of cryptocurrencies built on a dispersed peer-to-peer network, but has also become the default standard for cryptocurrencies, inspiring an ever-growing multitude of followers and spinoffs.
As the forerunner of the cryptocurrency era, Bitcoin is still the coin people generally refer to when they talk about digital currency. Bitcoin was made publicly available in the year 2009 and rose to popularity around 2010 and has been on a roller-coaster ride since then. However, it wasn’t until 2017 that the cryptocurrency broke into popular awareness.
There are several explanations why Bitcoin has such a volatile price history. Understanding the factors that impact its market price can help one decide whether to invest, trade or continue watching its developments. Like most merchandise, assets, investments, or other goods, Bitcoin’s price depends profoundly on supply and demand. As an asset implemented swiftly by investors and traders, assumptions about price schedules play a crucial part in Bitcoin’s value at any given moment. Media outlets, influencers, opinionated industry entrepreneurs, and well-known cryptocurrency enthusiasts create investor concerns, leading to price fluctuations.
Volatility has been intense, with crypto assets changing significantly in 2022. The market has been dropping since reaching all-time highs in November 2021.