The cryptocurrency markets have taken a sharp downturn in the past few hours, with Bitcoin Falls Below $29,000 level for the first time in over 6 weeks. The entire crypto market capitalization has shed over $20 billion, with altcoins following a similar downtrend and trading in the red.
Bitcoin Heads South After Range-Bound Trading
The Bitcoin community may have been better prepared for the price action over the last 24 hours given Bitcoin’s tendency to not stay still for too long. This comes as the cryptocurrency had been quietly range-bound trading between $29,000 and $31,000 for almost a week, with even the U.S. Federal Reserve’s interest rate hike on Wednesday failing to significantly shift the market environment.
The weekend then arrived which is naturally a less active period, and the BTC price remained hovering around the $29,500 level. However, that all changed during the early Asian trading hours today when bears took control and pushed Bitcoin further south than it had been trading. As a result, the price dipped to a low of $28,750 on Bitstamp, the lowest level since June 21.
Since then, it has managed to recover a couple hundred dollars but is still below the $29,000 threshold. Its dominance over alternative cryptocurrencies stands at 48.3% on CoinMarketCap, while its market capitalization has retraced to $562 billion.
Altcoins Follow Suit As Markets Turn Red
When Bitcoin prices fall, most other cryptocurrencies tend to follow suit. This has also been the case over the last 24 hours. ETH failed to move past $1,900 for several days straight, and a 1.5% loss has now pushed the second-largest cryptocurrency below $1,850. Additionally, Ripple, Dogecoin, Cardano, Polkadot, Shiba Inu, Tron, and Uniswap are all in the red by a slight margin.
Further losses are seen from cryptocurrencies like Polygon, Solana, and Litecoin which are down by up to 4% on the daily. The situation is even more dire with Stellar and Optimism, as XLM has shed 5.5% while OP is down 8% in recent trading. CoinMarketCap reports the total crypto market cap now stands at $1.160 trillion, having dropped $20 billion from its all-time high yesterday.
Technical Analysis Paints A Gloomy Price Picture
Turning to technical analysis, Bitcoin is still struggling to move past the $29,300 resistance level which has proven strong over the last week. The 50-day simple moving average (SMA) near $29,500 is also acting as a tough barrier. With bears now in control, the next key support level to watch is at the June lows of around $28,000 to $28,500.
Looking at momentum oscillators, the Relative Strength Index (RSI) on the daily chart is right around the halfway mark which indicates a balance between buyers and sellers. However, the Moving Average Convergence Divergence (MACD) indicator just formed a bearish crossover, adding to the downside risks.
On the 4-hour chart, Bitcoin managed to defend the $28,730 support but remains stuck in a descending channel. A break below this demand zone could accelerate losses toward the $27,000 price zone. The bearish bias is also corroborated by the downward sloping moving averages on this timeframe.
Global Macro Factors Add To Cryptocurrency Weakness
Besides technical pressures, the overall weakness in cryptocurrencies also stems from a deteriorating global macro environment. Recession fears are on the rise worldwide which typically leads to risk-off sentiment. This is evident in slumping stock markets over the last few months.
Moreover, central banks globally are on a monetary policy tightening spree to combat runaway inflation. Last week saw the ECB make its first rate hike in 11 years. Adding to this, the Fed also looks poised to continue raising interest rates aggressively, as acknowledged by Jerome Powell in his latest testimony.
Higher interest rates tend to negatively impact speculative assets such as cryptocurrencies which do not provide yield. Thus, Bitcoin and altcoins are likely to remain under pressure as central banks keep normalizing policy.
Bitcoin Struggles To Retain Buyers Above $20,000
Looking ahead, sustaining above the psychological $20,000 mark is key for Bitcoin to avoid further capitulation. This level provided strong support during the previous bear market and needs to hold to maintain the long-term bullish structure.
Failure to do so could see BTC/USD revisit the June lows around $17,600. The $14,000 price zone is the last line of defense before Bitcoin enters a full-blown crypto winter. However, given its strong on-chain metrics, the odds of this seem relatively low. But traders need to remain cautious if macro headwinds persist.
Key Takeaways: Bearish Technical Setup, Global Recession Fears Weigh
- The cryptocurrency markets have taken a sharp downturn, with Bitcoin falling below $29,000 for the first time in over 6 weeks.
- BTC had been range-bound between $29,000 and $31,000 over the past week but bears have now taken control.
- Major altcoins like ETH have also followed Bitcoin’s descent and are trading lower.
- Technical analysis shows immediate support at $28,500 but the bias remains bearish, calling for a drop toward $27,000.
- Global recession fears and central bank policy tightening are fueling risk-off sentiment, weighing on cryptocurrencies.
- Sustaining above $20,000 remains key for Bitcoin to avoid further losses in the short-term.
In summary, the technical setup remains tilted to the downside for Bitcoin and the broader crypto markets. Adding to the weakness are mounting macro uncertainties which could lead to more choppy price action ahead. Traders need to watch key support levels closely even as long-term bullish prospects remain intact.