By John Ikani
Bitcoin’s price plunged below $36,000 on Friday — for the first time since July 2021— extending a slide that started when it dropped below $40,000 Thursday evening.
Other digital currencies have suffered just as much, if not more, with Ether and meme coins mired in similar drawdowns.
Before Thursday’s big drop, Bitcoin’s price was between $39,000 and $45,000 last week, and it’s been between $35,000 and $44,000 so far this week.
What Happened?
This week’s big drop comes amid the stock market’s worst week in nearly two years, and after the release of the Federal Reserve’s long-awaited report on a possible government-issued digital currency.
As many have pointed out over recent weeks, the big reason why cryptos like Bitcoin are falling alongside tech stocks, experts argue, is the US Federal Reserve’s more hawkish turn in its November meeting, indicating an accelerated pace of tapering and interest rate hikes — a shift away from policies that buoyed crypto since 2020.
With the Federal Reserve intending to withdraw stimulus from the market, riskier assets all over the world have suffered.
Also the Biden administration is reportedly preparing to release an initial government-wide strategy for digital assets as soon as next month and has tasked federal agencies with assessing the risks and opportunities that they pose.
Where is crypto headed?
A crypto market analyst at Japanese crypto exchange Bitbank, Yuya Hasegawa believes Bitcoin’s near-term path “really depends on next week’s [Federal Open Market Committee] meeting,” he told Fortune. He sees the coin’s potential bottom this year to be somewhere around $28,000, which was roughly its bottom price in 2021, according to Hasegawa and crypto research and data firm Messari (though he believes Bitcoin can rebound to trade between $60,000 and $80,000 by year’s end).
For Edward Moya, senior market analyst at Oanda Edward Moya, Bitcoin is likely to remain volatile in the next couple of months, suggesting that from a technical standpoint, it might trade in the $35,000 to $50,000 range during the first quarter of this year. After that, he expects the crypto to find more stable ground after the Fed’s second rate hike this year, and end 2022 in a better spot (he estimates possibly around $60,000). Moya believes Ethereum, meanwhile, should rebound and trade above $4,000 this year (it’s currently trading around $2,600), but points out Ethereum is losing marketshare in NFTs, and he’s unsure it will “have an easy run” to $5,000.
Kevin Kelly, the head of markets and macro at crypto research firm Delphi Digital, also expects Bitcoin to be on a bumpier path: he told Fortune via email that he expects “the crypto market to struggle in the short to medium-term,” adding that “the latest sell off the last 24 [hours] was a bit quicker than we initially anticipated but sentiment has continued to deteriorate the last few weeks.” He said the key levels they are watching are $35,600 to $37,200, “which represents a potential cluster of liquidations if we breach these levels,” after which “we’d be looking at support” near $34,000. Kelly said they “can’t rule out” a drop to the low $30,000 range, however, “if sentiment continues to deteriorate.”
