On Tuesday, the flagship cryptocurrency hit a new swing low and dropped to $20,950 at the beginning of the trading session.
Later on that day, the BTC price started to rise, and currently, it is trading at $22,701.
Bitcoin's resounding drop, which the cryptocurrency market has been watching since the beginning of the week, was the largest since December 2020. Last Friday, the leading digital asset was trading at $30,000. Thus, in just two trading sessions, the exchange rate of BTC collapsed by almost 30%.
In May, Bitcoin fell by 15.59%. Over the past two months, its price collapsed by 1.6 times to $29,000 from $45,800. At the same time, the price dropped by 27% in the spring of 2022.
Since November of 2021, when BItcoin hit an all-time high above $69,000, the cryptocurrency has already lost about 70% in price. At the same time, many other digital assets have plummeted from their all-time highs.
According to CoinGecko, the world's largest aggregator of virtual asset data, the total capitalization of the crypto market has sagged by more than $150 billion since the beginning of this week.
Altcoin market
The leading altcoins followed the spectacular decline of Bitcoin. On Tuesday, Ethereum fell by 14.19% to $1,145. Meanwhile, a day earlier, Bitcoin's main counterpart crashed by 12% to $1,300, its lowest level since February 2021. Ethereum lost 34.92% of its value over the past week.
As for cryptocurrencies from the top 10 by capitalization, all of them, except Cardano, went into the red zone following the market's flagship crypto.
According to CoinGecko, the world's largest aggregator of virtual asset data, Gala coin gained 17.2% and topped the list of the top 100 most capitalized digital assets in the last 24 hours, while cETH nosedived by 18.1% and took the top spot in the fall list.
According to the results of the last week, the main outsider among hundreds of leading cryptocurrencies was cETH coin dropping by 40.1%, and the key favorite was LEO Token increasing by 4.6%.
Why the crypto market collapsed
At the beginning of the week, the crypto market showed a spectacular decline due to risk aversion after the data on inflation in the US was released on Friday, economists say.
According to the US Federal Bureau of Labor Statistics, in May the inflation rate in the country rose to 8.6% on a yearly basis, which was the worst reading in the past 40 years, since the winter of 1981. In addition, market analysts had earlier predicted that the annual inflation rate would remain at the level of 8.3% seen in April 2022.Against the backdrop of soaring inflation in the US, crypto market participants fear further aggressive steps and tighter monetary policy of the Federal Reserve, as decisive actions of the Central Bank can provoke a decline in the global economy.
An additional downward factor for the virtual assets market was also the permanent fall of key US stock indices, in particular, NASDAQ Composite last week. Thus, during the trading session on Friday, the indicator of high-tech companies NASDAQ topped the list of losers among the leading stock exchanges of America, having decreased by 3.52% to 11340.02 points.
Earlier, the experts of the investment company Arcane Research stated that the correlation between BTC and technology securities has reached the highest level since July 2020.
Such a close correlation between Bitcoin and the NASDAQ index has made investors question the cryptocurrency's ability to be a hedging instrument against inflation and fear that BTC may soon become a traditionally risky asset.
As a result, according to CoinShares, investors withdrew more than $100 million from the cryptocurrency market during the week of June 6-12. Bitcoin predictably suffered the most. American investors were the most active in withdrawing their own funds from digital assets.
One of the most important reasons for concern of crypto market participants today remains the prospect of liquidation of positions of the largest BTC investor - American company MicroStrategy. At the moment, the company obtains 129,218 coins, the price of which in the last few days has fallen to $2.8 billion.
The sell-off of such a volume of the first cryptocurrency may trigger a further collapse of its price.
Analyst forecasts
The declining crypto market is forcing experts to make the most pessimistic predictions about its future. Thus, the day before, former head of the cryptocurrency exchange BitMEX Arthur Hayes said that the vital task for bitcoin was to hold above the key level of $20,000. Otherwise, the market will face another wave of sales, he added.
Earlier, a popular cryptoanalyst and microblogger under the nickname Rekt Capital said that Bitcoin touched the 200 SMA and this indicated that the cryptocurrency was approaching the local bottom. In the very near future, the expert suggests, Bitcoin may fall below $20,000.
Lark Davis, a renowned crypto market expert, believes that BTC has already hit the bottom. As confirmation of his opinion, he draws traders' attention to the fact that in recent days Bitcoin looks more oversold than during its falling to swing lows in 2018. The current collapse of the crypto market, Davis believes, will be followed by a strong rise.
Luno Vice President Vijay Aiyar disagrees with his counterparts and argues that the crypto market will take quite a while to reach the bottom, which means that in the next couple of months, the value of BTC and other crypto assets will be falling.
