The cryptocurrency market is in the grips of a major sell-off, with Bitcoin and other major digital assets seeing double-digit percentage losses amid a broader rout in risk assets. The total crypto market cap has shed over $200 billion in the past 24 hours alone as panicked investors rush to the exits.
Leading the decline is Bitcoin, which has sliced through the psychologically significant $30,000 level like a hot knife through butter. The pioneering cryptocurrency last traded hands below this key support in July 2021, and many analysts had pointed to it as a crucial line in the sand for the ongoing bull market. As of writing, BTC is down 11% to $29,300.
Altcoins are faring even worse, with Ethereum shedding 15% to trade around $1,800 and other major caps like Solana and Cardano hemorrhaging over 20%. The brutal price action has some investors wondering whether the bull run that began in 2020 has finally come to an end.
Risk Assets Under Fire As Fed Tightens
The crypto carnage comes amidst turmoil in broader financial markets, as central banks led by the U.S. Federal Reserve take increasingly hawkish stances in the face of multi-decade high inflation. Equities have cratered, bond yields are surging, and former high-fliers in the tech sector are deep in bear market territory.
Cryptocurrencies, which have become increasingly correlated with U.S. equities, have been swept up in the maelstrom of risk-off sentiment. The crypto market has shed roughly $1 trillion in value since peaking at $3 trillion in November 2021.
“Crypto is getting hit on multiple fronts right now between macro headwinds, the general market selloff, fears around the Coinbase layoffs, and now the growing unease about Celsius’ liquidity crisis.”
– Noelle Acheson, Head of Market Insights at Genesis Trading
Contagion Fears Grip Market
Adding fuel to the fire are growing fears of contagion within the crypto ecosystem itself, with all eyes currently on crypto lender Celsius. The popular DeFi platform, which allows users to earn interest on their crypto holdings, abruptly halted all withdrawals, swaps, and transfers between accounts Sunday night citing “extreme market conditions”.
The move has sparked concern that Celsius may be facing a liquidity crisis that could see it go insolvent, with disastrous effects for its 1.7 million customers and the broader market given its sheer size with over $12 billion in assets under management. Comparisons are already being drawn to the infamous Terra stablecoin collapse in May.
Where is the Bottom?
With crypto sentiment undergoing a dramatic reversal from the euphoria of 2021 and contagion risks now adding to the potent mix of macro and regulatory headwinds, many investors are searching for signs of where the market bottom may lie.
For Bitcoin specifically, the 200-week moving average around $22,000 is seen as the next major support level should the $30K zone prove untenable – a strong possibility given BTC is on track to print the first weekly close below it since 2020.
“The $30,000 level was a critical support level which has held 4 times before. It has now been broken, which means a bigger fall to at least $25,000 or the 200-week moving average at $22,000 is highly likely. For ethereum it’s likely $1,300 is the next major support.”
– Kok-Hwa Wong, fund manager at AXA Investment Managers Asia
Other technical analysts are watching for signs of capitulation such as a spike in the Bitcoin Relative Strength Index (RSI). The last time the oversold indicator hit a low of 21.71 marked the bear market bottom of 2018.
Long-Term Adoption Story Still Intact
While the macro picture has undoubtedly darkened for crypto in the near-term, many bulls argue that the underlying fundamentals and growth narrative remain intact. Major institutions like BlackRock and Fidelity continue to ramp up their presence in the space, and adoption is steadily spreading with total crypto users now estimated at over 300 million globally.
“This price action shouldn’t surprise anyone who understands crypto’s history or technology adoption cycles more broadly. It’s always a bumpy ride, but the network effects of bitcoin and crypto more broadly continue compounding cycle-to-cycle, even if it’s less obvious during bearish phases like this one.”
– Chris Burniske, Partner at Placeholder VC
For now, crypto traders are battening down the hatches as the perfect storm of macro, contagion, and regulatory risks collide head-on with long-term adoption hopes. With Bitcoin now trading at a near 60% discount from the all-time highs set just 7 months ago, bargain hunters are lying in wait to potentially write the next chapter in the crypto story – even if more short-term pain lies ahead.
- 2018 Bear Market Bottom: BTC fell 83% from previous ATH
- 2022 Drawdown (To Date): BTC down 58% from Nov 2021 ATH
- Key Support Levels: $30K (broken), $25K, $22K (200-week MA)
