Bitcoin dropped below $20,000 on Saturday to its weakest in 18 months, extending a slide on investor worries about growing troubles in the industry and the general pull-back from riskier assets.
The digital currency sector has been pummeled this week after cryptocurrency lending company Celsius froze withdrawals and transfers between accounts, while crypto companies started laying off employees and there were reports that a cryptocurrency hedge fund ran into trouble.
It has coincided with an equities slide, with U.S. stocks suffering the biggest weekly percentage decline in two years on fears of rising interest rates and growing likelihood of recession.
Bitcoin, the biggest cryptocurrency was last down 7.79% at $18,848, having earlier touched $18,732, its lowest since December 2020.
It is down about 59% this year, while rival cryptocurrency Ethereum-backed ether is down 74%. In 2021, Bitcoin peaked at over $68,000.
“Breaking $20,000 shows you that confidence has collapsed for the crypto industry and that you’re seeing the latest stresses,” said Edward Moya, Senior Market Analyst, The Americas OANDA, on Saturday.
Moya said that “even the loudest crypto cheerleaders from the big rally are now quiet. They are still optimistic long term but they are not saying this is the time to buy the dip.”
The sector has also suffered losses after companies such as Coinbase Global Inc, Gemini and Blockfi said they would lay off thousands of employees as investors ditch risky assets.
The slide is hitting retail investors that bought into the asset.
“There’s a tremendous amount of people that will be scarred forever,” said Moya, referring to retail buyers. “But there are still a lot of people that were about to get into the space and there’s still interest. The interest only exploded last year and most people got started small.”
Jeffrey Gundlach, chief executive of DoubleLine Capital, said on Wednesday he would not be surprised if bitcoin fell to $10,000.
Others say the deepening slide could force more investors to unload bitcoin, which rose along with other risky assets during the era of pandemic stimulus.
“The $20,000 level for Bitcoin is an important technical level and the dip below may trigger more margin calls resulting in forced liquidations,” said Jay Hatfield, chief investment officer at Infrastructure Capital Management in New York,.
“Bitcoin may dip below the $10,000 level this year as the Fed liquidity driven bubble fully bursts with Bitcoin returning to its pre-pandemic levels.”
At Saturday’s lows, bitcoin was in danger of closing below key levels identified by technical analysis, which could reinforce bearish sentiment.
One of those levels was $19,225, the 76.4% Fibonacci retracement level of its rise during the pandemic. The other was $19,666, the cycle high for the previous bitcoin rally that peaked in 2017.