“Although painful, the removal of the industry’s ‘junk’ is probably healthy,” says one expert.
Bitcoin fell below $19,000 for the first time since December 2020 as signs of deepening pressure within the crypto industry continue to pile up against a backdrop of currency tightening.
The largest digital token by market value fell as much as 11% to $18,334 on Saturday, setting a record 12th consecutive daily decline according to data from Bloomberg.
Ethereum fell below the psychological $1,000 mark, down nearly 13%, to $951. This is the lowest level since January 2021. The two main pillars of the cryptocurrency market have both retreated more than 70% from the historic highs reached in early November.
“What we are seeing is more liquidations driving prices and investor sentiment lower, which is triggering even more liquidations and negative sentiment. It still needs some ‘clearing’ but that will run out at some stage,” said Noelle Acheson, head of market insights at Genesis, one of the largest and best-known lenders in the digital asset space.
The latest leg of the decline pushed Bitcoin below $19,511, the highest point the currency had reached during its last bullish cycle in 2017, which it reached at the end of that year. Throughout its roughly 12-year trading history, Bitcoin has never fallen below the peaks of previous cycles.
Altcoins have been no exception to the negative investor sentiment in the wake of Bitcoin’s decline, with every token in the Bloomberg trading in the red. Cardano, Solana, Dogecoin and Polkadot recorded 24-hour declines of between 9% and 12% on Saturday, while privacy tokens such as Monero and Zcash lost up to 11%.
A toxic mix of bad news and higher interest rates has been detrimental to riskier assets like cryptocurrency. The Federal Reserve raised its key interest rate on June 15 by three-quarters of a percentage point – the biggest increase since 1994 – and central bankers have hinted that they will continue to raise rates aggressively this year in the race to tame inflation.
“Investors continue to position themselves defensively after last year’s liquidity-led bull market in digital assets,” Alkesh Shah, head of cryptocurrency and digital asset strategy at Bank of America Corp. said in a note on Friday. “While painful, the industry’s ‘junk’ exit is likely healthy as investors turn their attention to projects with clear roadmaps for cash flow and profitability versus pure revenue growth.”
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