Bitcoin and several other cryptocurrencies all went down in value on Thursday, breaking a long time of stability. This big change happened when traders started selling digital assets because they thought interest rates would stay high for a longer time than they had thought before.
In the last 24 hours, Bitcoin’s price dropped by 2%, to $28,500. This sudden change in price shows that the biggest cryptocurrency is often very volatile. In recent times, this kind of price change hasn’t happened because Bitcoin has been trading in a fairly narrow band, from $29,000 to $30,000. This has led to historically low levels of price change.
Antoni Trenchev, co-founder and managing partner at crypto lender Nexo, said, “Bitcoin investors have been excitedly waiting for a catalyst to break Bitcoin out of its period of low volatility and sideways movement. Now, as Bitcoin falls toward the bottom of the trading range it has been in for almost two months, it faces a real test of its strength and makes investors nervous.
Economic data and the minutes from the most recent meeting of the Federal Reserve‘s monetary policy committee have an impact on Bitcoin’s price, just like they have on the stock market, where both the Dow Jones Industrial Average and the S&P 500 have experienced significant drops in the last two days.
This week’s release of U.S. economic data, such as retail sales and industrial production numbers, has added to the story that the economy is doing well. Additionally, analysts have raised their estimates for the growth of the gross domestic product (GDP) in the third quarter. Also, the minutes from the Fed’s policy meeting in June, which were made public on Wednesday, showed that the central bank is still committed to fighting inflation by raising interest rates.
As long as the economy is doing well, there isn’t much reason for the Fed to lower interest rates from where they are now. Investors are becoming more and more sure that rates will go up even higher than they are now. Since March 2022, rates have been going up, which has a big effect on investments that are sensitive to risk, like stocks and Bitcoin. Since this is the case, the latest changes in the economy make things harder for cryptocurrencies.
How far could Bitcoin fall now that it has been jolted back into action?
“The drop below $28,800 has shown that the bears still have the most power in the market. As we move forward, the next important support levels are at $28,000, which is a round number, and then around $27,200. This last point consists of the 200-day moving average and the support for the upward movement that began in November. Alex Kuptsikevich, an analyst at the brokerage firm FxPro, said, “These are important points to keep an eye on.”
Ether, the second-largest cryptocurrency after Bitcoin, dropped by 2% and settled at $1,790. Altcoins, which are smaller coins, also went down in value. Cardano and Polygon both lost about 1% of their value. The trend was also going down in the area of meme coins. Both Dogecoin, which fell by 3%, and Shiba Inu, which fell by 8.22%, did worse than expected.