Bitcoin dropped below $19,000 on Wednesday morning, its lowest level since June. As cryptocurrencies were sold off, the overall value of the cryptocurrency market dropped below $1 trillion.
The last time the asset fell under $19,000 was on July 4, when it fell to $18,600. Before that, in November of 2020, Bitcoin hit $18,900 on the way to new all-time highs of nearly $60,000 the next year.
There appears to be a variety of factors leading investors to sell Bitcoin. Bitcoin’s value has historically moved in tandem with that of the stock market. On Friday of last week, the Dow Jones Industrial Average dropped 3.03%, and the S&P 500 dropped 3.37%.
Put another way, the total market valuation of the US stock market dropped more than a trillion dollars in a single day, which is a lot compared to the size of the cryptocurrency market. So as the stock market drops, so does the value of Bitcoin and the cryptocurrency market in general.
Investors have been selling riskier assets like stocks and Bitcoin as a result of the Fed’s monetary policy of keeping interest rates high to counteract four decades of inflationary pressures.
“The macro narrative is very hard to be able to let go and will drive risk assets,” Kevin Loo, head of investment analytics at IDEG Asset Management Ltd., was quoted on Bloomberg TV as saying.
Bitcoin is below $20,000. We have been here before, and it’s likely that we could actually go slightly lower.
Yet, some analysts still hold out hope that the forthcoming Ethereum network upgrade will attract investment flows into Ether and other digital assets.
It’s clear that altcoins like Ether and others have more potential than bitcoin, as they’ve managed to outperform bitcoin in terms of price appreciation. Since their respective lows in June, Ether has surpassed bitcoin.
The merge, a massive upgrade planned for the Ethereum network this month, is expected to increase the network’s efficiency, according to its supporters.
Speaking on the matter, Vijay Ayyar, vice president at crypto exchange Luno told CNBC:
“Ethereum hit yearly highs against the bitcoin pair in anticipation of the merge,” Ayyar said.
”Hence there has been a lot more interest and activity in the Altcoin space while Bitcoin consolidates.”
At the time of writing, Bitcoin was trading at $18,885, down 4.8% on the daily chart. Ethereum, on the other hand, was trading at $1,542, down 7.4% on the 24hr chart.