The value of $20,000 dollars per bitcoin is, according to experts, a psychological barrier. And on Saturday (06.18.2022), said cryptocurrency fell below that mark to $17,800, a level only seen in 2020according to CoinDesk, a price-tracking platform. Wider sales have been seen in the past eight months, with bitcoin losing 60% of its value since the start of 2022, as high inflation and interest rate hikes interest on the part of central banks weigh on the decisions of investors.
The CryptoRank economic analysis platform reports that bitcoin fell to the average mining price of that digital asset. Also, the $20,000 barrier is important because institutional investors can sell it at that pricefurther encouraging the negative spiral.
Inflation fuels the race for safety
Cryptocurrencies experienced a movie rally in 2021, as investors – flush with cash thanks to central banks and governments keeping money flows open to soften the economic damage unleashed by the COVID-19 pandemic – swooped on digital currencies. But as cheap money, coupled with supply chain bottlenecks and the energy crisis, began to push inflation to the highest levels in decades, the uptick began to fade. Investors began looking for safer assets.
To combat inflation, five major central banks signaled tighter monetary conditions last week. Among them, the US Federal Reserve (Fed) raised interest rates by 75 basis points, the largest increase since 1994, which scared investors. They fear that higher rates could lead to a recession, as it would increase borrowing costs for consumers and businesses, and hurt their investments in cryptocurrencies and stocks.
A “hard road ahead”
The cryptocurrency selloff comes against the backdrop of a broader drop in asset prices. The US S&P 500 stock index has been on the decline as recession fears mount in the world’s largest economy. The president and CEO of the Federal Reserve Bank of Cleveland, USA, Loretta Mester, said on Sunday that the risk of a recession has increased in that country. “Most of these big central banks are praying for an inflation easing, and hoping the data will match up, but unless there is a de-escalation in the Ukraine-Russia war, the escalation will continue to fuel price fears. energy, so there could be a tough road ahead,” Stephen Innes, of SPI Asset Management, told AFP.
The crypto world, unsettled by inflation concerns, has seen a variety of projects collapse, including stablecoin terraUSD, and its associated token LUNA.. Last week, crypto lender Celsius shocked investors by stopping the withdrawal of funds for clients.
This weekend, Singapore-based Three Arrows, one of the major cryptocurrency players, failed to make payments to lenders. The crypto hedge fund’s troubles added to investor doubts.
Despite the dark outlook for bitcoin, the Salvadoran president, Nayib Bukele doubled his bet on that virtual currency. “Stop looking at the graph and enjoy life”he tweeted on 06.19.2022.