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The vast majority of retail client accounts lose money when trading CFDs.

You should consider whether you can afford to take the high risk of losing your money.

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The vast majority of retail client accounts lose money when trading CFDs.
Important Notice - Fraud awareness
Important Notice - Scam alert
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.
Important Notice - Fraud awareness
Important Notice - Scam alert
The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider. You should consider whether you understand how CFDs / Spread betting work and whether you can afford to take the high risk of losing your money.
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Bitcoin recovers from 2-year low at $20,072

The cryptocurrency market witnessed its worst moments this week, with Bitcoin prices falling to two years low at $20,072. The fall in Bitcoin had significantly affected altcoins also, dragging their prices down to a new all-time-low in two years. Ethereum fell to a new low at $1,012, Binance (BNB) had created a new low at $198, Dogecoin had created a new low at $0.04978, Uniswap had seen a new low at $3.35, LINK had made a new low at $5.30 and so on.

In light of the deep fall witnessed yesterday during the Asian session, analysts had described the year 2022 as one of the worst moments in Crypto history, with Bitcoin staying bearish for six consecutive months marking the first and second quarters of the year.

At the moment, the prices of Bitcoin and other cryptocurrencies are rising again after the momentary second fall following the outcome of the Fed's session yesterday. Many experts consider the current bullishness as a false breakout that traps the bulls. This is because the news of a Hawkish interest rate hike by 75 basis points is expected to crash the price of Bitcoin below the current level.

What are the primary reasons for the crash in Bitcoin?

Three significant reasons explain the cause of the heavy fall seen in the crypto market this week. We have discussed these causes below:

Interest rate hike: The hawkish stance of the Fed towards a progressive interest rate hike for the dollar has so much affected the performance of cryptocurrencies. Often, hiking the interest rate causes investors to withdraw from risky assets and invest in the US 10-year Treasury yield and other less risky investments. Fears of an aggressive interest rate hike during the Fed's session yesterday caused more investors to sell off their crypto assets ahead of time. Thus, many investors forecasted the possibility of a more aggressive interest rate hike of 75 basis points before this session. Of course, it came out as expected yesterday.

Increasing Dollar strength: Virtually all crypto assets have been pegged to the US dollar. Hence, the crypto market is often so much affected by increasing dollar strength. The dollar index attained a new all-time high at 105.6 during the Asian session yesterday. This had pushed down the prices of every other asset pegged to their lowest points in years.

It is important to note that the dollar index and the prices of cryptocurrencies move in opposite directions. Therefore, every crypto trader must pay great attention to the dollar index while deciding whether to go long or short on Bitcoin.

Reduction in Demand: With the progressive hiking of the interest rate in the quest to curb inflation, investors are bound to lose appetite for buying cryptocurrency. The new target has become the US treasury yields and bonds. Unsurprisingly, the US 10-year treasury yield rose to its highest today at 3.475%. This is also its highest point in eleven years. Thus, this is a clear testimony that the current month's demand for risky assets and crypto has drastically reduced.

Will the crypto market rise again?

The outcome of the Fed's session yesterday, which ended with a 75 basis points interest rate hike for the US dollar, is a negative sign for cryptocurrency. Despite the current rise, it is essential to point out that the market has not yet fully reflected the recent interest rate hike. Many analysts have described the current rise as a false breakout that traps the bulls.

Last Updated: 16/06/2022

This market commentary and analysis has been prepared for ATFX by a third party for general information purposes only. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell as it does not take into account your personal circumstances or objectives, and should therefore not be interpreted as financial, investment or other advice, or relied upon as such. You should therefore seek independent advice before making any investment decisions. This information has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. We aim to establish and maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. The market data is derived from independent sources believed to be reliable, however we make no representation or warranty of its accuracy or completeness, and accept no responsibility for any consequence of its use by recipients. Reproduction of this information, in whole or in part, is not permitted.


 

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