Bitcoin falls below $22k and returns to a three-week low as cryptocurrencies suffer a sharp sell-off
- Bitcoin was down around 9% at $21,400 on Friday afternoon
- Cryptos had already started falling on Wednesday along with US stocks.
- Largest Liquidation of Long Futures Positions Since June 18 – Coinglass Data
Bitcoin has fallen below $22,000 to its lowest level in over three weeks as cryptocurrencies suffer another sudden and sharp sell-off.
The world’s best-known digital currency was down almost 9 percent to just over $21,400 on Friday afternoon, its lowest level since July 27, according to data from Coindesk.
Ether was also down 8 percent to $1,700, while Binance Coin was down 8 percent, Cardano was down 14 percent, and Solana was 11 percent lower.
Cryptocurrency sell-off: Analysts say it may have to do with Fed comments indicating more interest rates are on the way
The trigger for today’s sell-off is unclear, although bitcoin and other cryptocurrencies had already started to slide on Wednesday along with US stocks after the Federal Reserve signaled more rate hikes were coming.
“Weakness has seeped into the crypto sphere as speculators pulled out of high-risk assets amid expectations that higher interest rates would stick around much longer,” said Susannah Streeter, senior analyst at Hargreaves Lansdown Investments and Markets.
Craig Erlam, senior market analyst at Oanda, said that Bitcoin’s failure to recoup its losses “suggests the move has merit.”
Such sharp moves are common in the highly volatile cryptocurrency market.
The value of digital currencies skyrocketed during the pandemic as many invested saved cash into lockdowns.
But bitcoin and other cryptocurrencies have taken a hit in recent months as central banks and governments raise interest rates and end an era of loose monetary policy.
Bitcoin price has hit its lowest level since July 27, falling below $22,000 today
Simon Peters, crypto markets analyst at eToro, also believes it may have to do with a sell-off in US equities triggered by the Fed’s comments.
“With the close correlation between US equities and cryptocurrencies in recent months, I suspect this has trickled down to the crypto markets and that is why we are seeing a sell-off.”
He added: “The trend has also perhaps been exacerbated by the liquidation of long positions in the bitcoin perpetual futures markets.”
Referring to data from Coinglass, Peters said that today was the largest liquidation of long futures positions since June 18, which coincidentally is when Bitcoin hit its lowest rate of the year.
Bitcoin dipped below $19,000 in mid-June as investors spooked over the collapse of stablecoin TerraUSD and a major crypto lender froze customer withdrawals.
It has now lost more than two-thirds of its value since hitting its all-time high of $69,000 in November.
But ether had been outperforming bitcoin in recent months ahead of a major upgrade to its blockchain called ‘Merge’, which will soon change the way ether transactions will be validated.
Streeter explains: ‘The network is moving towards the ‘proof of stake’ system, which has emerged as an alternative to crypto mining, or what is known as the ‘proof of work’ process.
“Instead of miners being more likely to add blocks to the blockchain if they generate more computing power, when staking users are more likely to be randomly selected to add blocks if they hold more money.
“While some see the proof-of-stake system as a way for the crypto world to limit its environmental footprint and burn less energy, the upgrade has not insulated the coin from today’s wild price swings.”
