San Francisco, United States of America (USA)- Bitcoin is now trading under US$20 000, at one time it was trading at US$19 149, the first time since November 2020.
This comes on the back of a broader market pullback where all cryptocurrencies are trading well in the red.
Bitcoin has been closely correlated with stock indexes, in particular the Nasdaq, which rose on Wednesday after the Federal Reserve hiked interest rates by 0.75 percentage points. That was the biggest rate hike in almost 30 years since 1994 and the news back on the day it was announced made Bitcoin rise about four percent but then it slightly dropped.
The previous major rate hike was made by the Federal Reserve during the first days of May when it was increased by a half percentage point and that was the biggest hike in 22 years, the reaction of Bitcoin was also similar to the current one first, it held steady and then started falling down.
Federal Reserve chairperson, Jerome Powell, hinted at another rate hike in July but cautioned that the 75-basis-point increase is an unusually high one and does not expect moves of such magnitude to be regular.
According to the CEO of Euro Pacific Capital and SchiffGold, Peter Schiff, who has been analyzing Bitcoin for years, the cryptocurrency is likely to fall below the US$10 000 mark to US$8 000.
“My guess is that there will be some kind of dead-cat bounce off that line, but don’t get too excited. That bounce may be your last chance to get out above US$10 000,” said Schiff.
Although Bitcoin breaching US$20 000 is a largely symbolic barrier, experts believe a drop below this level could trigger a wave of forced liquidations in which large-scale crypto investors will be forced to close positions on Bitcoin derivatives products because they will now possess insufficient collateral. Such events would likely only further drive down the price of Bitcoin, triggering further liquidations.
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