Bitcoin Dips Below $21,000: Why This Dip Is Different From That Of 2018


Author: Michael Stern

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Bitcoin’s four-day winning streak snapped on Sunday with the largest cryptocurrency tumbling below $21,000. Even investors that use eToro were not spared from the burn. Bitcoin was recently trading at about $20,800, down more than a percentage point over the past 24 hours. However, it is still higher than it stood before starting its mini-rally on Wednesday.

Market observers see the crypto continuing to trade in the $18,000-$22,000 range that it has maintained for a month. At least until investors are sure that central banks can lick inflation without casting the global economy into recession.

Bitcoin And Ether Staying Alive

Ether, the second largest crypto by market cap, was recently changing hands at roughly $1,350, flat over the same period. Most other major altcoins were in the red with UNI and AAVE off approximately 2.5% and 3%, respectively.

Cryptos veered slightly from stocks’ path as major indexes closed solidly in the green on Friday. The gains reversed some ground lost earlier in the week. This happened while investors were trying to reconcile the latest data showing increased inflation among major brands in a range of industries. With more encouraging signs, the global economy may not be cratering anytime soon.

Hot Inflation Affecting Bitcoin And Others

On Wednesday, the Bureau of Labor Statistics’ consumer price index showed June inflation rising 9.1%. A 40-year high, with core goods and services, such as food and energy rising at an even faster rate. The University of Michigan’s widely-watched, monthly consumer sentiment index remained near its all-time low in its most recent release Friday.

Crypto news remained largely bleak, even without the continued afflictions of crypto lender Celsius. The crypto bank filed for Chapter 11 bankruptcy protection on Wednesday. And in the same vein, crypto hedge fund Three Arrows Capital, which filed for Chapter 15 bankruptcy earlier this month.

Among other, more recent developments, Russian President Vladimir Putin signed a law banning digital payments across the nation. This was according to a policy amendment on Thursday. The legislation prohibits the use of cryptocurrencies as a means of payment for goods, services and products in Russia.

BitBull’s DiPasquale will be eyeing the possible impact of the U.S. central bank’s expected interest rate hike later this month on bitcoin pricing. The bank’s Federal Open Market Committee, which sets monetary policy, meets next Tuesday and Wednesday and is widely expected to raise interest rates by at least 75 basis points in its quest to stem inflation.

“If Bitcoin does not break down from this range by the end of the month, especially post the FOMC, we could see it as a strong sign of a potential long-term bottom,” DiPasquale wrote.

Why the ICO Crypto Crash of 2018 Can’t Happen in 2022

Digital assets crashed hard in 2018 as a result of the bursting of the 2017 Initial Coin Offering (ICO) bubble. As students of crypto history know, once ICO projects finished their token sale they converted their treasury to dollars, and this rapid glut of bitcoin and ether on the market crashed prices leading to the crypto winter of 2018-2019.

Those who had a broad portfolio of these ICO tokens and HODL’ed them through the dark days of that crypto winter came out well ahead, beating the stock market, even high-growth tech stocks that had their best days between 2018-2020, by a mile.

But there were also plenty of retail investors that got burned. Not just on fraudulent tokens, but on the rapid plummeting of crypto prices.

A big part of the crash, and subsequent winter, was that the infrastructure at the time wasn’t very sophisticated compared to what’s available now. As bad as the market correction of 2022 is, what happened in 2017-2018 was minuscule as far as market capitalization goes.

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Michael Stern is a calculated risk taker with deep technical insight into digital currency and the development of strategic strategies.