Bitcoin falls below $22,000 to lowest in over three weeks

Bitcoin has tumbled below $22,000 to its lowest level in over three weeks as cryptocurrencies suffer another sudden, sharp sell-off. 

The world’s most known digital currency was down almost 9 per cent to just over $21,400 on Friday afternoon, its lowest level since 27 July, according to Coindesk data. 

Ether also tumbled 8 per cent to $1,700, while Binance Coin was down 8 per cent, Cardano fell 14 per cent and Solana was 11 per cent lower. 

Crypto sell-off: Analysts say it may have to do with comments from the Fed signalling that more interest rates were coming

The trigger behind today’s sell-off is not clear, although bitcoin and other cryptocurrencies had already started to drop on Wednesday in tandem with US stocks after the Federal Reserve indicated more rate hikes were forthcoming. 

‘Weakness has seeped into the crypto sphere as speculators retreated from highly risky assets amid expectation that higher interest rates were set to linger for much longer,’ said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

Craig Erlam, senior market analyst at Oanda, said bitcoin’s failure to recover its losses ‘suggests there is substance to the move’.

Such sharp moves are common in the highly volatile cryptocurrency market. 

The value of digital currencies boomed in the pandemic as many invested cash saved in lockdowns. 

But bitcoin and other cryptos have been hammered in recent months as central banks and governments hike interest rates and bring to an end an era of loose monetary policy.

Bitcoin price has hit its lowest level since 27 July, falling below $22,000 today

Simon Peters, crypto markets analyst at eToro, also believes it may have to do with a sell-off in US stocks triggered by the Fed’s comments.

‘With the tight correlation between US equities and crypto in recent months I suspect this has filtered through to crypto markets and it’s why we are seeing the sell-off.’

He added ‘The trend has also perhaps been exacerbated by liquidation of long positions on bitcoin perpetual futures markets.’

Referring to data from Coinglass, Peters said today has been the biggest liquidation of long positions on futures since 18 June, which coincidentally is when bitcoin hit its lowest rate of the year. 

Bitcoin slumped below $19,000 in mid June as investors were spooked by the collapse of stablecoin TerraUSD, and a major crypto lender freezing customer withdrawals.

It has now lost more than two-thirds of its value since hitting its all-time high of $69,000 in November. 

But ether had been outperforming bitcoin in recent months ahead of a major upgrade of its blockchain called ‘Merge’, which will soon change how ether transactions are going to be validated.

Streeter explains: ‘The network is moving to “proof of stake” system, which has emerged as an alternative to crypto mining, or what is known as the “proof of work” process. 

‘Instead of miners being more likely to add blocks to the blockchain if they generate more computer power, by staking, users are more likely to be randomly selected to add blocks if they lock away more currency. 

‘Although the proof of stake system is viewed by some as a way the crypto world can limit its environmental footprint and burn less energy, the upgrade hasn’t insulated the currency from today’s wild swings in price.’

This post first appeared on Dailymail.co.uk