Bitcoin, Ethereum & Crypto Test New Lows as Market Braces for Bigger Rate Hike on Wednesday
The cryptoasset market crash continued on Tuesday, with bitcoin (BTC) falling to as low as USD 20,800 before trimming some of its losses. The significant selloff came as the market braces for the possibility of an unusual 75 basis point rate hike from the US Federal Reserve (Fed) this Wednesday.
At 14:47 UTC, bitcoin stood at USD 22,162, down 5% in the past 24 hours and down close to 30% in the past 7 days. At the same time, ethereum (ETH) traded at USD 1,203, down 1% for the day and 35% for the week.
The losses come as the probability of a 75 basis point rate increase by the Fed has increased since Monday, data from the derivatives exchange CME Group shows.
From a probability of 21.7% on Monday, there is now a 91% probability that the Fed will increase rates by 75-basis points at its ongoing meeting that ends on Wednesday this week, judging from the CME FedWatch Tool.
Major investment banks such as Barclays and Jefferies are also saying that a 75-basis point hike is likely following last week’s higher-than-expected inflation report, per the Wall Street Journal.
Hayes warns of ‘massive sell pressure’
Commenting on the market from a more crypto-focused perspective, former BitMEX CEO Arthur Hayes wrote today that the USD 20,000 level for BTC and USD 1,000 for ETH will be critical.
If these levels break, “massive sell pressure” can be expected in spot markets as dealers hedge themselves, Hayes said, warning that this could even cause some unhedged over-the-counter dealers to “go belly up.”
Earlier in June, he estimated that USD 25,000 to USD 27,000 is the bottom of this bitcoin market cycle.
Novogratz more bearish on stocks than crypto
And although the selloff in crypto has been brutal, with crypto falling more than stocks in June, Galaxy Digital CEO Mike Novogratz is now more bearish on stocks than on crypto, Bloomberg reported.
Speaking at the Morgan Stanley Financials Conference, Novogratz reportedly said that he believes BTC and ETH are “much closer to the bottom” than stocks, which he said could fall another 15% to 20%.
Still, he also stressed that investors should proceed with caution.
“Until I see the Fed flinch, until I really think, OK the economy is so bad, and the Fed is going to have to stop hiking and even think about cutting, I don’t think it is time to really deploy lots of capital,” Novogratz was quoted as saying.
More downside, or not?
A feeling that the bottom is close in the crypto market was also shared by others, although most observers pointed to USD 20,000 as a key level to watch.
“We’ve taken out many of the prior support levels that we would have established since the run-up in late 2020,” Steve Sosnick, Chief Strategist at stock brokerage Interactive Brokers, told Bloomberg.
He went on to refer to Michael Saylor’s company MicroStrategy as potentially coming under pressure when bitcoin nears USD 20,000. “When there’s this idea of a looming potential margin-call driven seller out there, yeah, the low USD 20,000, that’s a real line in the sand,” he said.
The USD 20,000 area for bitcoin is watched due to comments from MicroStrategy’s former chief financial officer Phong Le that the company would need to put up additional collateral to avoid a margin call on a BTC-backed loan from Silvergate Bank should the price fall below USD 21,000.
However, according to Saylor himself, the company is still safe and in no immediate danger of getting a margin call.
Reminder: MicroStrategy may have an average price in the $20ks, but they’re not at any risk of liquidation. Not for a long time, and even then, they have options .. https://t.co/WY0fBSX7qg
— andrew wertheim 🪐 (@awertheim) June 14, 2022
In all, MicroStrategy is now down by close to USD 1bn on its massive bitcoin investment of close to 129,218 coins, now worth around USD 2.9bn. The company’s average buying price for BTC stood at USD 30,700 as of April 5, according to its latest public filing.
Despite the massive drawdown, Saylor himself appeared relatively unfazed on Tuesday, writing in a tweet “stack sats and stay humble.”
Key technicals to watch
Another key indicator of bitcoin’s long-term price performance that is closely watched by market participants is its 200-week moving average, which currently sits at around USD 22,350.
The level is watched since BTC has never stayed below it for any prolonged period and many analysts are seeing it as a theoretical floor for the price. And despite the price currently trading slightly below it, some are pointing to it as a potential buying opportunity.
In either case, the indicator by no means guarantees that a bottom has been reached.
Commenting on the same, Chris Burniske, Partner at crypto-focused venture capital firm Placeholder, said that both BTC and ETH are “slicing through the 200W [moving average] like butter.”
“Structural macro flows are so against us, it likely only matters when the risk-tides turn, could be entering relatively uncharted bear territory for crypto soon here,” Burniske wrote, adding that “the fight going on in markets is much bigger than us.”
Others again pointed to different chart models that they also said should offer some short-term support for the bitcoin price.
Among them was Jurrien Timmer, director of global macro at asset management giant Fidelity, who said that bitcoin has now reached the bottom of “a well-defined down-channel.”
It’s cold comfort to us bulls, but BTC has now reached the bottom of a well-defined down-channel, as well as an ABC wave count (wherein wave C equals wave A). The macro couldn’t be any worse right now, so who knows if it sticks, but it’s something. pic.twitter.com/vino920Ddy
— Jurrien Timmer (@TimmerFidelity) June 13, 2022
Still, with the Fed’s next move unknown to most, stronger than usual uncertainty about the future appears to continue to plague crypto investors.
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Learn more:
– This Is Why Fed Might Attack Inflation More Aggressively
– Bitcoin, Ethereum & Crypto Dive as Celsius Adds Fuel to the Fed Fire This Week
– Bitcoin Historical Performance is No Guide for the Future in 2022
– Bitcoin Undervalued, Crypto Now Better Than Real Estate – JPMorgan
– As inflation ‘Mellows Out’, a Bottom in Crypto is Likely in ‘The Back Half of 2022’ – VC Investor
– Crypto & Stocks ‘Decoupling’ Prediction Flops but There’s Still Hope
