As a result of last week’s remarkable surge, Bitcoin is now seeing one of its largest drops in recent months.
After starting the week at $18,742, the coin’s price jumped to a staggering $22,537 on September 14, a gain of 15% over its September 7 low. The market has rallied strongly since its June bottom.
Bitcoin’s steep 14 percent correction during the crash almost entirely nullified this gain. Bitcoin’s value dropped from $22,536 to $19,735 in the space of just two days.
Bitcoin’s link to the S&P 500 Index is blamed for the recent decline in its value. A few days earlier, the US government released the Consumer Price Index Report.
According to the data, year-over-year inflation rose from 8.1% – 8.3%. This report rocked the global financial markets.
Bitcoin Shaken By CPI Data
The stock and cryptocurrency markets were both affected by the release of the report.
The overall financial market followed the S&P 500’s lead and dropped 200 points. Following a decline in the index, crypto markets also went into tailspin.
The price of bitcoin dropped in line with the decline of 2972 points on the index. This crash caused a sell-off on the cryptocurrency market.
The decline is the result of more than just this report, though. The US Federal Reserve is considering boosting interest rates by 1 percentage point due to higher-than-expected inflation causing concerns for the start of a recession.
The Fed’s contemplation instills panic in the market, causing further declines in the value of both equities and cryptocurrencies.
Bitcoin’s current level of 78.60 fib has been exceeded as of the time this article was written. Bitcoin is now in an extremely dangerous position due to this downward trend.
BTC Bulls Need to Reclaim $20K Turf
If the $20,000 worth of psychological support is lost, the price could fall to levels that were before September 9, 2009. This is possible because of the availability to real-time information.
19 is the current fear and greed index reading, which indicates very fearful market sentiment. If Bitcoin is to be able to survive the market woes, bulls will need to recover to the level of 78.60 Fib.
This prior support level can serve as the market’s catalyst for recovery. Should the bulls triumph over the bears, September 7 might see the price fall to approximately $18,000
This could be false, depending on the current market conditions. As the S&P 500 continues to lose ground, Bitcoin may follow suit. There is still some correlation between these markets, as indicated by the 0.69 correlation coefficient.
Historical market activity causes the correlation coefficient to fluctuate between 0.93 and 0.65.
For the crypto market to be revived, it is essential that there are better market conditions and that bulls work for long-term recovery.
BTC market capital at $384 billion according to the daily chart. Source: TradingView.com| Source: TradingView.com Pixabay featured image, Chart from TradingView.com The analysis provided above is the author's opinion and should not necessarily be considered investment advice.