Bitcoin briefly fell below $20,000 on Wednesday as numerous aspects from macroeconomic worries to issues with cryptocurrency firms proceed to weigh in the marketplace.
The world’s largest cryptocurrency was last trading up by lower than 1% at $20,359.25, in response to CoinMetrics data. Earlier on Wednesday, bitcoin fell as little as $19,841.
Other digital coins including ether were also lower.
Bitcoin has been trading inside a decent range within the last two weeks unable to make a serious move much above $22,000.
“A narrative that would well play out for the remainder of the 12 months and beyond is guiding bitcoin lower today, one among looming recession and mushrooming levels of inflation,” analysts at cryptocurrency exchange Bitfinex said in a note on Wednesday.
Inflation continues to stay high while central banks are also aiming for further rate hikes, sparking fears of a recession within the U.S. and elsewhere.
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On Tuesday, U.S. stock markets fell and futures remained under pressure on Wednesday. Bitcoin has been closely correlated to movements in U.S. stock markets and are likely to follow them lower or higher.
Vijay Ayyar, vp of corporate development and international at crypto exchange Luno, told CNBC that bitcoin is probably going going to trade between $17,000 and $22,000 “for some time, given the present market sentiment” and one other expected rate of interest hike from the U.S. Federal Reserve in July that continues to “weigh down all risk assets.”
“Most bounces are being sold off for the past few weeks, typically categorized as bear market bounces, aiming to trap late buyers, only to have them dump positions lower,” Ayyar said.
Crypto liquidity issues
Sam Bankman-Fried, the CEO of cryptocurrency exchange FTX, has stepped in to rescue struggling firms including BlockFi and Voyager Digital by offering credit lines.
“The market is taking a breather after the falls. There are still systemic issues as people prop up various dominoes from triggering knock on effects,” Charles Hayter, CEO of website CryptoCompare, told CNBC via email.