Popular cryptocurrency Bitcoin fell more than 8 percent in a matter of hours on Thursday, hitting a two-month low of $25,314. Bitcoin’s fall put it on course for its worst week since November last year, while also triggering a collapse in the prices of all other cryptocurrencies and leading to more than $1 billion in liquidations.
The plunge in prices of Bitcoin and other cryptocurrencies might have been fueled by the possibility of high-interest rates for a prolonged period and thin crypto trading, reported Bloomberg.
FRNT Finacial’s Stephane Oullette while speaking to Bloomberg noted that every decline in Bitcoin this year has been followed by a period of recovery. “The next few days should give more clues to whether the selloff will continue and we’ll see a reversal of this year’s trend,” Oullette noted.
He added that the signs that Bitcoin is making a divergence from this year’s trends if the cryptocurrency goes below the $25,000 mark. On the other hand, he added that if Bitcoin pushed past the $30,000 mark it could even go past this year’s high of $31,818.
Why are the Bitcoin prices plunging?
Head of research at Enigma Securities Joseph Edwards while speaking to Reuters attributed the fall in Bitcoin prices to low volatility and a lack of enthusiasm from retail investors.
Meanwhile, speaking to Bloomberg, Riyad Carey, research assistant at blockchain data firm Kaiko, noted that this week’s drop in cryptocurrency prices could be due to the market’s exposure to larger trades, noting that the past four months have seen the lowest average daily volume of crypto transactions since 2020.
Reportedly, the cryptocurrency market is too reliant on narratives that can prop up the prices. A recent report by the Wall Street Journal noting that Elon Musk’s SpaceX had sold its Bitcoin holdings after writing down the value by $373 million might have played a major part in worsening the crash on Thursday.
(With inputs from agencies)
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Updated: 19 Aug 2023, 08:50 AM IST