Sunday, December 4, 2022

Bitcoin (BTC) Eyes Crash Below $25K As These 3 Factors Weigh

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Bitcoin (BTC) losses deepened over the weekend, with the token slumping to its lowest level since late-2020 amid a flurry of sell signals.

BTC crashed 20% in the last two days and is now trading marginally above $25,000. The token’s market capitalization has also slumped below $500 billion.

While BTC’s latest round of losses were triggered by overheated U.S. inflation data, a mix of other negative indicators caused sharp selling over the weekend.

Rising inflation is now expected to spur a bigger-than-expected interest rate hike by the U.S. Federal Reserve this week, creating more headwinds for BTC.

Trouble in the DeFi space also worsened crypto sentiment as major player Celsius suspended withdrawals due to a severe liquidity crunch.

BTC traders fear the Fed as inflation surges

At the forefront of economic events this week is the Federal Reserve’s two day meeting, starting from June 14. In light of the high inflation figures, focus is going to be on by how much the central bank is willing to raise interest rates.

Data from exchange operator CME Group shows 76% of traders are pricing in an up to 75 basis point hike this week, bringing interest rates close to pre-pandemic levels.

The move is expected to be extremely bearish for crypto markets, given that it signals tightening liquidity conditions. It also reflects a Fed that is fearful of a coming economic shock.

The weekend price action was brutal for cryptos, and today’s price action isn’t encouraging either. The BTC price has retested the 25K support level, and we will likely see the price falling towards the 20K critical price.

-Naeem Aslam, Chief Market Analyst at Avatrade

DeFi losses are contagious

The DeFi space appears to be facing a severe liquidity crunch, highlighted by Celsius’ recent suspension of withdrawals.

The crunch stems from the de-pegging of Lido Staked Ethereum (stETH), which is causing panic selling in Ethereum. Losses in the second-largest cryptocurrency have far outweighed those in BTC.

Celsius’ suspension, coupled with losses in ETH, have caused widespread selling in the DeFi space. This has worsened sentiment towards the crypto market, and has also affected BTC prices.

 

With more than five years of experience covering global financial markets, Ambar intends to leverage this knowledge towards the rapidly expanding world of crypto and DeFi. His interest lies chiefly in finding how geopolitical developments can impact crypto markets, and what that could mean for your bitcoin holdings. When he isn’t trawling through the web for the latest breaking news, you can find him playing videogames or watching Seinfeld reruns.
You can reach him at [email protected]

The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.

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