Bitcoin Just Dropped Below $30K – What prompted this latest drop?

Bitcoin prices have suffered some heavy losses recently, dropping below $30,000 during a day when risky assets saw a massive sell-off.

TradingView data showed that the world’s most popular cryptocurrency fell to $29870.33 around 8 PM ET.

At this point, the cryptocurrency is trading at its lowest value since July, according to additional TradingView numbers.

By dropping to this point, the digital asset is down more than 50% from its all-time high of around $69,000 that it reached late last year.

[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]

monetary tightening

Explaining these recent price moves, many analysts spoke to the central bank’s tightening of bank funds, saying that this development was causing investors to flee risky assets.

Central banks around the world have injected trillions of dollars of stimulus into the global financial system in order to support economic conditions during the global pandemic.

Moreover, they have been maintaining low benchmark interest rates for years, a policy that they have begun to reverse. Between interest rate hikes and asset sales, these financial institutions can have a significant impact on global asset markets, which many believe have become inflated as a result of unprecedented stimulus.

Charlie Silver, CEO and President of Permission.io, shared this position.

“With the Fed withdrawing liquidity from the market, all the risk assets are tied together and sold,” he stated.

Joe DiPasquale, CEO of crypto hedge fund BitBull Capital, also commented on the matter, offering similar input.

He noted that “the tightening of monetary policy is causing investors to reduce their exposure to asset risk, and the current correlation of Bitcoin to the S&P 500 is also down today.”

Macroeconomic factors

While the aforementioned market watchers have focused on the actions of central banks, Bitcoin Magazine’s Sam Rule, a market analyst, cited a wide range of macroeconomic variables driving recent bitcoin price movements.

“Rising prices, the historical pace of monetary policy tightening to combat unprecedented levels of inflation, the strengthening of the US dollar against other global currencies, and the deterioration of the global growth outlook are all macroeconomic forces driving the decline of bitcoin,” he said.

“Bitcoin’s decline is primarily dependent on these macro factors and the increased risk of global credit shrinkage playing a role, as opposed to its fundamentals, adoption and growth potential,” Roll said.

Adopt strong encryption

Syd Powell, CEO of Maple Finance, a Sydney-based institutional capital market, also spoke about the volatility in cryptocurrencies, comparing these innovative assets to technology stocks and the significant gains they’ve enjoyed.

“What I think is important to keep in mind here is that in the long run, bitcoin and the crypto industry in general is going through a very different process than what traditional stocks are going through right now,” he said.

“The cryptocurrency world is experiencing an incredibly fast rate of global adoption – perhaps twice the rate at which the Internet itself was used in the 1990s,” Powell noted.

“And if you look at Internet-based companies in the 1990s, they certainly had their fair share of ups and downs. But when observed over a multi-year timeline, their overall price hike was nothing short of meteoric.”

“And bitcoin along with cryptography undergo a similar process, albeit at a more explosive rate.”

Disclosure: I have some bitcoin, bitcoin cash, litecoin, ether, EOS, and sol.

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