Bitcoin and other cryptocurrencies held on to Sunday gains after the biggest cryptocurrency dipped below $20,000 on Saturday, amidst industry gloom
Bitcoin on Monday mid-morning held on to Sunday gains, following a Saturday sell-off that saw it dip below the symbolic value of $20,000 (£16,359).
The extreme volatility for which cryptocurrencies are well-known has, in this case, resulted from a combination of bad news from major players in the industry as well as macroeconomic challenges posed by central bank interest rate hikes.
Such factors have led to a twelve-day slide that abruptly reversed itself on Sunday, when the world’s largest cryptocurrency rose 16 percent after plunging as low as $17,599.
The $20,000 mark is symbolic for investors as it was roughly the peak of the digital asset’s last bull cycle in 2017, when it climbed as high as $19,511.
In its 12-year history Bitcoin has so far never dropped below the peaks of previous cycles.
Bitcoin’s plunge below $20,000 was its first since December 2020.
The recent weakening in the crypto sector has followed difficulties from major players in the industry such as crypto hedge fund Three Arrows Capital, which is exploring options including the sale of assets and a bailout by another firm, the Wall Street Journal reported on Friday.
On the same day Asia-focused lender Babel Finance said it would suspend withdrawals, following a similar move earlier in the week by US-based lender Celsius Network.
#Bitcoin dumped below the $20k previous ATH only over a long weekend, in the middle of a low liquidity environment. This could signify the bottom, if it retakes/holds $20k quickly by Tue/Wed.
Otherwise, we’re in a bear market for a while and $20k becomes major resistance.
— Vinny Lingham (@VinnyLingham) June 19, 2022
Bitcoin traded at around $20,500 mid-morning BST on Monday, while second-largest cryptocoin Ethereum was at around $1,100, having dipped below its own symbolic level of $1,000 to as low as $881 over the weekend before rising 26 percent to $1,140 on Sunday.
Financial analysts noted that the overall tone remains negative, with central bankers, for instance, signalling they plan to continue aggressive interest rate hikes this year to combat inflation.
The US Federal Reserve raised its main interest rate by three-quarters of a percentage point on 15 June, its biggest increase since 1994.
Entrepreneur and investor Vinny Lingham, echoing other analysts’ comments, remarked that Sunday’s bounce “could signify the bottom” if the gains continue to hold.
“Otherwise, we’re in a bear market for a while,” he wrote on Twitter.
Even following the latest rally Bitcoin is down more than 30 percent this month alone and some 70 percent from the all-time high it reached last November.
Overall the capitalisation of the cryptocurrency market has fallen to roughly $870bn, down from a peak of $2.9tn in November 2021, according to Coinmarketcap.