Bitcoin fell less than 1% in the past 24 hours to $19,700, having climbed above $20,300 on Friday before retreating, according to the stock market’s fall. Trading below the key $20,000 level, the biggest digital asset is now out of the $20,000 to $25,000 range, where it remained stagnant for much of the summer, after a dramatic sell-off in mid-June that knocked Bitcoin from 30,000 dollars.
“Bitcoin continues to show resilience around $20,000, but this is really being tested as risk aversion sweeps the markets once again,” said Craig Erlam, analyst at broker Oanda. “A major break at this point could be really damaging, with the next key level below here being the June lows around $17,500.”
“Given the outlook for risk appetite in the near term, it doesn’t look good.”
This view is shared by other analysts.
“Bitcoin’s daily range has narrowed massively and this gives us an indication that a massive capitulation is coming,” said Naeem Aslam, analyst at broker AveTrade. “We believe this capitulation could happen any day now, as Bitcoin has been trading in a tight range for a long time.”
Aslam cited two factors as evidence that traders are struggling with selling pressures to keep cryptocurrency prices higher.
The first is that Bitcoin has largely managed to avoid the selloff that has hit the stock market in recent weeks, with
Dow Jones Industrial Average
and
S&P 500
both are down nearly 3% over the past five sessions. Cryptocurrencies should, in theory, be traded as uncorrelated assets, but have been shown to be linked to fluctuations in other risk-sensitive assets, particularly stocks. Bitcoin has avoided the major downside it was vulnerable to in the past.
The second factor is the continued run in the foreign exchange market, where most major currencies have lost heavily against the US dollar. The U.S. dollar index, which measures the greenback against a basket of six bonds, is up 14% so far this year and was another 0.2% higher on Monday. A strengthening dollar has been a major headwind for Bitcoin prices in the past.
“These two factors indicate that the bulls are holding the ground very well and have not allowed Bitcoin’s price to take a hit,” Aslam said. “On the other hand, if there is a capitulation to the downside, then the next move will not be around the $18,000 or $15,000 price level. the sell-off could be so intense that it could easily push prices towards $12,000.
Bitcoin prices have proven difficult to predict in the short term—much to the dismay of analysts and ambitious price targets—and cryptocurrencies are notorious for their volatility. But with inflation remaining high and the Federal Reserve showing little sign of stopping its tightening of financial conditions – which is reducing demand for risk-sensitive assets – Bitcoin is likely to remain under pressure.
Beyond Bitcoin,
Ether,
the second-largest cryptocurrency, rose less than 1% as anticipation continued to build around “The Merge,” a long-awaited and highly anticipated critical upgrade to the Ethereum blockchain network. But altcoins, or smaller cryptocurrencies, have been weaker, such as
Solana
lost 1% and
Cardano
was 3% lower. Memecoins – originally intended as jokes on the Internet – also fell, with
Dogecoin
down 3% and
Shiba Inu
down 6%.
Write to Jack Denton at jack.denton@dowjones.com
