• Wed. Jun 22nd, 2022

Bitcoin (BTC) rebounds but struggles to hold above $20,000

ByHazel R. Lang

Jun 20, 2022

Bitcoin continues to trade around the $20,000 mark, keeping investors updated on where the price will move next.

Nurphoto | Getty Images

Bitcoin jumped 8% on Monday after a strong sell-off over the weekend, but continues to hover around the $20,000 mark, keeping investors on edge.

The world’s largest cryptocurrency was trading at $19,935.98 as of 3:20 a.m. ET, according to data from CoinDesk. In the past 24 hours, bitcoin has risen sharply above $20,000 and fallen to $18,261.75.

Over the weekend, bitcoin had fallen to $17,601.58.

Meanwhile, Ether jumped more than 12% and was trading above $1,075 as of 3:13 a.m. ET, according to data from CoinDesk.

Although the rebound is welcomed by investors, bitcoin is still around 70% below its all-time high from November last year and is down 57% year-to-date.

“Bounce of the Dead Cat”

With bitcoin unable to hold itself convincingly above $20,000, industry watchers said the rally could be short-lived.

Vijay Ayyar, vice president of business development and international at Crypto Exchange Luno, told CNBC that unless the price of bitcoin closes above $23,000 on a daily basis, “there chances are it’s a dead cat bounce.”

“We are oversold so a rebound was expected,” he said.

The broader cryptocurrency market has been plagued with a number of issues in recent weeks, starting with the collapse of the algorithmic stablecoin terraUSD and the associated luna token.

Attention has now turned to crypto lending companies promising users high returns for depositing their digital coins. Last week, Celsius, a company with 1.7 million customers and nearly $12 billion in crypto assets under management, suspended withdrawal of funds for customers, raising concerns about its insolvency.

Cryptocurrency companies have announced rounds of layoffs amid the market downturn. Coinbase, a crypto wallet and exchange, said last week it would cut 18% of full-time jobs. A lending company called BlockFi announced last week that it would lay off a fifth of its staff.

Macroeconomic factors, including high inflation and upcoming US Federal Reserve rate hikes, are also weighing on the market.

“When inflation is upon us and with rate hikes in sight, the risks of a recession around the corner are high,” Charles Hayter, CEO of CryptoCompare, told CNBC via email.

“The push that pushes me to higher rates sapping mortgage homeowners’ money means people are prepping and shrinking psychologically and digital assets are suffering.”

“Coupled with this, the decline in the digital asset ecosystem has exposed a number of systemic issues. »

The bottom of the market?

Given the sharp drop in cryptocurrency prices over the past few weeks, some observers have said that a market bottom may be near.

Giles Keating, head of Bitcoin Suisse, told CNBC’s “Squawk Box Europe” on Monday that “we are close to a point where some of the excess real leverage has now been driven out of the system and a bottom can begin. to form.”

Leverage refers to trading in which investors effectively use borrowed money to complete trades. This means that investors can get more exposure to positions with less initial capital. But this is considered a risky way of trading as it requires investors to ensure that they have enough capital to meet the so-called margin requirements. If they do not, their position is automatically liquidated. These liquidations are considered to be an important factor behind market movements.

Keating said there is still further liquidation risk, but he believes the majority of sales are complete.

“Now some people are warning that we’re still not there and if we were to go down significantly, we would see another wave of selloffs,” Keating said.

“There’s always that risk hanging over there. But my sentiment, given that I think these really, really big double-digit bounces that we’ve seen, in bitcoin, especially in ether, I think it’s It was a sign that a lot of these really big liquidations are now done and that the base is really forming.”

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