Friday, December 2, 2022

Bitcoin gains 10% and struggles to stay above $20,000

After selling off over the weekend, Bitcoin gains 10% but stays above $20,000, which worried investors. Bitcoin is down 57 percent so far this year.

At 5:14 a.m. ET, the price of bitcoin on CoinDesk is $20,648.50. In 24 hours, Bitcoin went from being worth over $20,000 to be worth only $18,261.75. This weekend, the price of Bitcoin reached $17,601.58. CoinDesk shows that ether is worth more than $1,131.63 at 5:14 a.m. ET. Bitcoin is down 57 percent so far this year, and it is down 70 percent from its high point in 2017.

Deadcat-jump

Analysts say that Bitcoin’s rise may not last long because it can’t stay above $20,000. Vijay Ayyar of Luno says, “This is a dead cat bounce” if bitcoin doesn’t close each day above $23,000.

Bitcoin gains 10% and he was hoping for a comeback. In the past few weeks, the algorithmic stable coin terraced and a related token called luna both went down.

Companies that lend crypto coins offer high rates of return. Last week, Celsius stopped withdrawals, which made people worry that the company would go bankrupt. Companies that deal with cryptocurrency have announced layoffs. On Monday, Coinbase said that it would be cutting 18% of its full-time jobs. Next week, BlockFi will lay off 20% of its staff. High inflation and rate hikes by the Fed hurt the market.

The CEO of CryptoCompare, Charles Hayter, says that inflation and rate hikes increase the chance of a recession. Higher interest rates take money away from people who have mortgages, so they cut back on spending, which hurts digital assets. The collapse of the digital asset ecosystem shows structural weaknesses.

Market trough?

Some people think that the recent drop in the price of bitcoin shows that it has reached its lowest point. Monday, Giles Keating, the director of Bitcoin Suisse, said that “some of the real excess leverage has been driven out of the system.”

Leverage means borrowing money to trade. More exposure for less money. It’s risky for investors to have to meet margin requirements. If they don’t, they’ll go sack. Liquidations move markets. Keating said that further selling could come, but that most selling is over.

Some worry that if we break any lower, there will be another wave of bankruptcies, Keating said. “There’s a risk. I think that the double-digit returns on bitcoin and ether mean that the big sales are over and the base is being built.

Read more: The Crypto market fall won’t damage the economy

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