Bitcoin and other cryptocurrencies tumbled on Tuesday as investor sentiment soured—and analysts are now eyeing another precipitous drop.
The price of BitcoinBTCUSD +3.09% fell 5% over the past 24 hours, plunging through the key $20,000 level and hovering around $19,500. The largest crypto made significant gains with a rally into last weekend, changing hands as high as $22,000, but has since fallen back. Now, the $18,000 bottom that was hit in the trough of a selloff in mid-June is in sight.
“Bitcoin’s recovery last week may have excited some but I imagine most will have viewed it with significant doubt,” wrote Craig Erlam, an analyst at broker Oanda, in a note. “Not only is the broader market environment not in its favor, even if the occasional bear-market rally inspires some hope, but the crypto community isn’t exactly buzzing either.”
It was much of the same pain elsewhere in crypto. EtherETHUSD +3.49%, the second-largest digital asset, shed 8% and was holding just above $1,000. Altcoins, or smaller cryptos, fared similarly, with SolanaSOLUSD +4.41% dropping 5% and Cardano losing 6%. Memecoins—initially intended as internet jokes—were also weak, with DogecoinDOGEUSD +2.23% sliding 6% and Shiba InuSHIBUSD +2.84% falling 8%.
Bitcoin continues to trade at less than one-third of its all-time high near $69,000, hit in November 2021, and just capped its worst quarter since 2011—a year in which it cracked the $1 threshold for the first time. The market capitalization of cryptocurrencies has tumbled from nearly $3 trillion eight months ago to $875 billion as investors are ready for what is becoming the next “crypto winter.”
The drawdown in digital asset prices has come, in part, from factors outside crypto’s control, including Bitcoin’s apparent correlation to stocks. The S&P 500 and tech stock-heavy Nasdaq have both slumped into a bear market this year amid investor fears over multi-decade high inflation, higher interest rates, and the risk of recession—which would be a poor environment for risky bets like Bitcoin.
The S&P 500 and Nasdaq lost 1.2% and 2.3% on Monday, with futures indicating another fall is coming on Tuesday—which will have added to the weight by pushing cryptocurrency prices lower.
The rout has created cracks in the crypto industry, exacerbating price declines and pressuring market participants. These include the meltdown of stablecoin Terra, breakdowns at lenders including Celsius and Voyager Digital, and the bust of a major hedge fund threatening wider contagion.
So where is Bitcoin going next? At least one analyst suggests the path of least resistance is further declining.
“Downside momentum is growing stronger,” Katie Stockton, the managing partner at technical research group Fairlead Strategies, wrote in a note.
“Bitcoin has a short-term overbought ‘sell’ signal, suggesting there will be a hard retest of support in the $18,300-$19,500 zone,” Stockton said. “A confirmed breakdown appears likely given the prevailing downtrend and would increase downside risk further toward secondary support near $13,900, defined by 2019 high.”
Stockton said that Bitcoin’s best hope for improvement, from a technical perspective, would be clearing its 50-day moving average near $24,500 as the first point of resistance. For now, cryptos showed few signs of rallying to that point.