Bitcoin Sees Seven Straight Weeks of Losses For the First Time
Shaurya Malwa - CoinDesk
Bitcoin (BTC) saw seven straight weeks of losses for the time first in its history amid a downturn in broader markets, stricter crypto regulations, waning retail interest, and systemic risks in the crypto space, data shows.
Bitcoin neared the $47,000 level in mid-March in a run that lasted a couple of weeks after a fall to $37,000 from November’s lifetime highs of nearly $69,000. The asset has since slid every week and could fall to as low as $20,000 if current market conditions continue.
Bitcoin, the world’s largest cryptocurrency by market capitalization has been long positioned as an inflation hedge, or an investment that is supposed to protect the decreased purchasing power of currencies or other assets.
That has failed to happen so far, however, as bitcoin is highly correlated with global markets and has traded similar to a risky technology stock in the past few months. Meanwhile, some analysts say investors are selling bitcoin as it advances.
"In our view, the trend of selling cryptocurrency on upside movements remains. Adding to the downside is the bleak outlook for U.S. monetary policy, where no light at the end of the tunnel with rate hikes can be seen yet," shared FxPro market analyst Alex Kuptsikevich in an email.
"We expect the bears not to loosen their grip in the coming weeks. In our opinion, a turnaround in sentiment may not come until the approach of the 2018 highs area near $19,600," Kuptsikevich added.
Bitcoin fell to as low as $24,000 last week as stablecoin Tether (USDT) briefly lost its peg to U.S. dollars. Sentiment among investors at the time was already reeling from the implosion of Terra’s LUNA and its stablecoin terraUSD (UST).
Inflation concerns affect bitcoin prices
Inflation concerns have contributed to bitcoin’s fall in the past several weeks. Earlier this year, the U.S. Federal Reserve hiked rates by the largest amount since 2000 this year as it seeks to tighten monetary policy following the $2 trillion stimuli in the past few years.
In April, analysts at Goldman Sachs said in a note that the Federal Reserve's aggressive measures to control inflation could result in a recession. The investment bank put the odds of an economic contraction – a phase of the business cycle in which the economy as a whole is in decline – at about 35% over the next two years.
Goldman senior chairman Lloyd Blankfein reiterated that sentiment over the weekend, stating the U.S. economy was at a “very, very high risk.” Such an environment could cause a drawdown in U.S. equities, which may spread to bitcoin and cause further sell-offs in the coming weeks if the current correlation continues.
The risks of a sell-off could already be starting to show. Last week, the $18.3 billion Grayscale Bitcoin Trust (GBTC), the world's largest bitcoin (BTC) fund, saw its market discount widen to an all-time low of 30.79%, as reported. The discount could be taken as a bearish indicator because it might mean a waning interest in bitcoin among traders.
GBTC is currently one of the only ways for stock traders in the U.S. to gain exposure to the price movements of bitcoin without the need to purchase the actual cryptocurrency. (Grayscale’s parent company, Digital Currency Group, is also the owner of CoinDesk, which is run as an independent subsidiary).
Bitcoin hovers under the pivotal support level of $30,000 at writing time, CoinGecko data shows.
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