Bitcoin rebounded Monday after a weekend sell-off but still struggled to remain above $20,000 as investors looked for solid ground.
Bitcoin has been in a prolonged slide since peaking above $68,000 in November 2021 — a retrenchment of more than 70 percent. The turmoil follows a spate of negative headlines in the crypto sphere, as well as intense stock market volatility as inflation and recession worries weigh on investors.
But investors might be in for more pain, according to Naeem Aslam, an analyst at trading firm AvaTrade who says bitcoin could move closer to $13,000.
Experts said Monday’s bounce was unsurprising because bitcoin was “oversold.” Still, pessimism remains, Aslam wrote.
In recent weeks, terraUSD and its sister cryptocurrency, luna, both dropped to nearly zero in value. Last Monday, the crypto bank Celsius, which manages close to $12 billion in assets, announced it would pause withdrawals. In a memo to its 1.7 million customers over the weekend, it said the process to stabilize its liquidity and operations would “take time,” underscoring investors’ worries about its financial health. Last Tuesday, crypto-exchange giant Coinbase said it would cut 18 percent of its workforce, or roughly 1,100 of its approximately 6,100 employees.
There were also domino effects. Crypto hedge fund Three Arrows Capital — which bought hundreds of millions of luna — said it suffered heavy losses.
Other cryptocurrencies also got dragged down alongside bitcoin. Ether, the native token of ethereum, briefly rallied by 9 percent after falling to its 18-month low at $880 on Saturday.
“This weekend’s collapse is a telltale sign that investors are selling crypto regardless of the price,” said Daniel Ives, an analyst at Wedbush. Investors were panicked over the debacles in the market as well as the broader stock market downturn, pushing the market toward a risk-off behavior where all risky assets are sold.
The crypto market is a barometer of the risk-off assets in the stock market, which on Friday closed out its worst week since the early days of the coronavirus pandemic. The Federal Reserve’s aggressive push to tame inflation — and the danger of sparking a recession — began to settle in last week after central bankers raised interest rates by three-quarters of a percentage point.
The Dow Jones industrial average, which last week closed below 30,000 for the first time since January 2021, has lost nearly 18 percent of its value in 2022. The S&P 500 and Nasdaq have fallen into bear markets — defined as a 20 percent fall from a recent high — and are down nearly 23 percent and 32 percent, respectively, year to date.
The U.S. stock market was closed on Monday in observance of Juneteenth. Trading resumes Tuesday.