Bitcoin Falls Below $20,000
A red arrow on a graph chart points from top left to bottom right. A Bitcoin with arms and legs rides the arrow downwards, holding reins, like it’s riding a horse.
Bitcoin fell to $19,526 on August 28, a six-week low, before bouncing back above $20,000. Correspondingly, the Dollar Index (DXY) – which moves in the opposite direction of bitcoin – neared its 20-year high. Bond yields increased and stock futures telegraphed risk aversion. Ethereum (ETH) also declined to $1,431 and Dogecoin (DOGE) fell to $0.06145.
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Bitcoin price affected by the Fed
The drop in price follows the annual Jackson Hole Economic Symposium where Fed Chairman Jerome Powell delivered a deflated speech that lasted a mere 8 minutes. As crypto analyst Will Clemente tweeted, Powell’s speech was a “bunch of nothing,” stating nothing unpredictable.
In response, the stock market closed down on Friday, setting the stage for Monday’s rough opening bell. By raising interest rates investors will yield more profit by investing in the dollar – a much more stable asset compared to Bitcoin.
On chain analysis
Bitcoin lost approximately 8% in 24 hours, breaking its 50-day moving average, 2% of which was shed in real time as Powell spoke on Friday. The drop fell out of a large bear flag which had developed over the last several weeks, according to the 4-hour chart.
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The U.S. Dollar Index (DXY), the measure of the dollar against other currencies, historically moves in the opposite direction of Bitcoin. The dollar hit 108.9 on the index, up from 107.6, in just a few hours on Sunday. Corresponding to the DXY, the bottom has been solidly supported at $18,000 over the last few months, despite the crypto winter. Investors should be aware that both the 100-day and 50-day moving averages are also indicating more bearish price activity yet to come.
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Macroeconomic factors
Both the European Central Bank and the Federal Reserve have signaled that they will hike interest rates by 75 basis points. This kind of global monetary tightening is usually bearish for liquid risk assets, such as cryptocurrencies – the most volatile asset class.
Bitcoin investors may be worried about the drop in price and whether it portends further lows in the future. However, despite the gloom, Bitcoin is showing its resilience, price drops notwithstanding. It still maintains a price point solidly this summer, above its low of $17,745 on June 18.
Uncontrolled by a central state, Bitcoin has only strengthened in price and global adoption, despite China’s ban on the asset. Blockware Solutions predicts 10% global adoption for retail sales by 2030.