The Price Of Bitcoin Is Falling. Cryptocurrencies Are Under Pressure From All Sides.

A week-long rally in Bitcoin BTCUSD -0.27% and other cryptocurrencies was halted Wednesday when regulatory pressures and macroeconomic factors propelled digital assets lower across the board amid pressures from multiple directions.

‍

There has been a significant decline in the price of Bitcoin over the past 24 hours, hovering around $22,000 and plunging below $21,900, its lowest level for weeks, at the trough of recent trading. There was a big rally in Bitcoin to begin the year, which led to speculation about a new bull market kicking off, but it has now stalled. The largest crypto has been unable to hold the $23,000 to $24,000 range that dominated for the past few weeks, much less the highs above $25,000 from the past month.

‍

"We expect downside follow-through due to the fact that short-term momentum has turned negative, maintaining our near-term bearish bias," said Katie Stockton, managing partner of Fairlead Strategies, an independent technology research firm. “It seems that support is initially located near the bottom of the daily cloud around $20,300, followed by the 200-day moving average around $19,700... Our long-term outlook remains bearish.”

‍

The price of cryptocurrencies tends to move based on factors that are both internal and external to the digital asset space, such as regulatory developments and macroeconomic forces, respectively. It is common for these factors to appear one at a time. The situation is not the same as it used to be.

‍

During the past week, sentiment fell amid concerns about crypto market functioning and a potential regulatory crackdown following revelations of a financial crisis at Silvergate Capital (ticker: SI). 

‍

As one of the largest U.S. banks federally insured with a focus on crypto companies and a crucial intermediary in institutional crypto markets, Silvergate faced a bank run after the collapse of FTX last year, which led to a liquidity crunch that threatens the future of the bank. The bank's crisis risks putting a strain on liquidity in wider markets, as well as triggering a new round of regulatory crackdowns as a result.

‍

Cryptos are weighed down by endogenous factors, but exogenous macro pressures have also recently emerged.

‍

It looked as if Bitcoin could drop through the $22,000 level late Tuesday and into Wednesday as a result of a rout in the stock market, where the Dow Jones Industrial Average and S&P 500 just experienced their worst day in two weeks. As a result of a macro backdrop of high inflation and rising interest rates, cryptos and stocks have become correlated, with investor fears spiking on Tuesday following remarks by Federal Reserve Chairman Jerome Powell, who said rates may remain higher for a longer period of time.

‍

“The markets began pricing in the possibility of a 50-basis point rate hike later this month after Fed chief Jerome Powell delivered a hawkish speech, which sparked a sharp decline in risky assets,” said Alex Kuptsikevich, an analyst at broker FxPro. “The consolidation of the price below $21,500 would be a strong signal for the market to move lower. However, in such situations, there will most likely be more buying at the end of the medium-term correction, and the bulls will only be able to celebrate victory once the price is back above $22,500."

‍

Besides Bitcoin, EtherETHUSD +0.02% -the second-largest cryptocurrency- dropped by 1% to $1,550, the lowest level in a year. Cardano ADAUSD -2.66%, which has fallen 1.5 percent, and Polygon, which has plummeted 3%, were two of the smaller cryptos or altcoins which were trading in the red. A similar pattern could be seen with Memecoins. DogecoinDOGEUSD -1.28% suffered a loss of 1.5%, while Shiba InuSHIBUSD +2.95% shed 1.5% in value.