- Wednesday, October 16, 2024
Bitcoin and other cryptocurrencies have finally seen some action after a prolonged period of inactivity, as traders have decided to sell their digital assets. This comes amidst the belief that interest rates will remain higher for a longer period than initially anticipated.
In the past 24 hours, the price of Bitcoin has fallen by 2% to $28,500. This drop in value is a notable change for the largest cryptocurrency, which has experienced a lack of volatility in recent times. For months, Bitcoin has been stuck between the $29,000 and $30,000 range, experiencing historically low levels of volatility.
According to Antoni Trenchev, co-founder and managing partner at crypto lender Nexo, Bitcoin investors have been eagerly waiting for a catalyst to break the cycle of low-volatility indolence. Now, they face a true test of resilience as Bitcoin tumbles towards the bottom of its trading range, which it has maintained for almost two months.
Similar to the stock market, where both the Dow Jones Industrial Average and S&P 500 have encountered significant declines in the past two days, Bitcoin's movement is influenced by economic data and the latest meeting minutes from the Federal Reserve's monetary policy committee.
U.S. Economic Data Reinforce Strong Economy
Recent economic data releases in the United States have further underscored the narrative of a robust economy. Key metrics such as retail sales and industrial production have shown positive results, leading to upgraded forecasts for third-quarter gross domestic product (GDP) growth. Additionally, the minutes released on Wednesday from the Federal Reserve's policy decision in June have affirmed their commitment to reducing inflation through higher interest rates.
Impact on Interest Rates and Crypto
Due to the strong state of the economy, the Federal Reserve has little motivation to lower interest rates from their current generational highs. As a result, investors are increasingly anticipating additional rate hikes. The rising interest rates since March 2022 have significantly impacted risk-sensitive assets like stocks and Bitcoin. Therefore, the latest news is unfavorable for cryptocurrencies.
Bitcoin's Vulnerability and Support Levels
Given these developments, the question arises: to what extent can Bitcoin's price decrease?
According to Alex Kuptsikevich, an analyst at broker FxPro, the recent drop below $28,800 has confirmed the dominance of bearish sentiment in the market. The next crucial support levels to watch are at $28,000 and the $27,200 area. The latter is particularly significant as it aligns with the 200-day moving average and uptrend support from November of last year.
Impact on Other Cryptocurrencies
Aside from Bitcoin, Ether, the second-largest cryptocurrency, experienced a 2% drop to $1,790. Altcoins like Cardano and Polygon also saw declines of around 1%. Memecoins, including Dogecoin and Shiba Inu, were also weaker, with respective losses of 3% and 8%.
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