Bitcoin struggles to keep $30k level support as the market sell-off continues

On Monday, Bitcoin and Ethereum struggled to keep key support levels of $30,000 and $2,000 respectively, as the stock market sell-off continued. Bitcoin fell below the $30,000 level support last week, touching a 16-month low near $26,000 before paring its losses and climbing back up to $30,000. If Bitcoin price declines further, support may be found near $19,400, while resistance may be found at $40,000 and further up near $48,200. 

Ethereum also retreated last week, trading below the $2,000 level support. If the Ethereum price continues to decline further support may be found near $1,700, while resistance may be encountered near $3,174.

This week is expected to be crucial for cryptocurrencies. If the market sell-off continues, it may give rise to investors panicking and dumping cryptocurrencies, which may lead to a liquidation cascade. On Monday, crypto markets struggled, as bulls fought to prevent crypto prices from crashing even further.

A strong risk-off sentiment has prevailed, driving investors to safer assets and dampening the appeal of cryptocurrencies. In the past six months, the cryptocurrency market has lost almost $2 trillion. A massive sell-off of tech stocks was triggered last week, sending cryptocurrencies into free fall. Most major cryptocurrencies plummeted this week, as crypto markets have been following the overall trends of stock markets and especially of tech stocks. 

Stablecoin TerraUSD collapsed last week, losing its dollar peg and trading as low as 5 cents, raising fears that other cryptocurrencies will follow in its wake. Luna has also crashed, losing 99% of its value. The Luna Foundation Guard has sold almost all of its recently acquired BTC reserves as the foundation’s Terra collapsed. The LFG sold more than $3 billion in Bitcoin, putting more pressure on the Bitcoin price.

Stablecoin Tether also lost its $1 peg briefly last week after suffering $3 billion in withdrawals, falling to 0.95 before regaining its dollar peg. Tether is the largest of the world’s so-called stablecoins and its fall has put to question the digital assets’ stability. If its price continues to fall it may lead to market contagion, exasperating cryptocurrency sell-off.

The dollar reached a 20-year high last week, buoyed by hawkish Fed policy and risk-off sentiment. The rising dollar diminishes the appeal of high-risk assets such as cryptocurrencies. Continued Russian hostilities against Ukraine are also increasing risk-aversion sentiment, putting pressure on crypto markets. 

In the past couple of weeks, the Fed raised its benchmark interest rate by 50 base points, its highest rate hike in 22 years and the BOE also increased its interest rate by 25 bp. The shift of major central banks towards a more hawkish fiscal policy has been putting pressure on cryptocurrencies over the past few months. Most major Central Banks are turning towards a tighter policy and a return to pre-pandemic interest rates, driving cryptocurrency prices down.

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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