Bitcoin prices have been crashing and could fall even further.
Courtesy Ethan Lou
The Bitcoin carnage continues, as the cryptocurrency breaks $20,000 to trade at its lowest level since 2020. Don’t be surprised if $10,000 is the next stop.
Bitcoin has dropped 7.2% to $19,027.52 during the past 24 hours, bringing it to its lowest level since December 2020. Worse still, Bitcoin’s price continues to break technical support levels, suggesting that there is still more downside ahead, despite having already lost more than 70% since peaking at $67,802.30 in November 2021.
This chart doesn’t begin to do Bitcoin’s decline justice, but it will have to do. And it points to just how weak the cryptocurrency has been and how much lower it can go.
For instance, though Bitcoin managed to hit a new all-time high back in November, it still looks to have created something of a “double top” with the April 2021 highs. The fact that it couldn’t accelerate once it “broke out” was, in hindsight, a sign that the breakout wasn’t to be. From there, it was a quick trip down to $40,000 or so, which became support for a while. When $40,000 broke, it was down to $30,000, and then held for a bit too. But when $30,000 broke, it was a quick trip down to $20,000.
Despite Bitcoin’s weekend drop, it hasn’t broken support around $20,000 just yet. That’s because, if we want to get really complicated, support is probably in a zone that extends from $18,300 to $19,500, according to Fairlead Strategies’ Katie Stockton. It’s one reason Bitcoin could sit around this area for a bit before breaking lower. And if $20,000 breaks, there’s no support until the next big round number at $10,000. Let’s agree to not think about what happens if Bitcoin breaks $10,000 just yet.
What should frighten crypto investors is just how well Bitcoin is performing relative to other coins. Ethereum, at $994.60, has fallen 79% from its record high, while Dogecoin has fallen more than 80%. As Stockton points out, “in the cryptocurrency market, Bitcoin is the ‘safe haven’ compared with altcoins.”
If Bitcoin counts as safe, that tells us everything we need about the argument that cryptocurrencies are a store of values. What has held up, at least on a relative basis, is gold. The precious metal closed at $1,835.60 an ounce on Friday, which is down 10% from its 52-week high on March 8, 2022. For the year, though, it is up 0.4%, or almost completely flat. And that’s despite a dollar that has done nothing but go up (gold is priced in dollars, so when the dollar rises, its price should fall, alleles being equal). It also knocks down another argument in favor of cryptos, that they are the new gold. And who knows, maybe Bitcoin’s drop could accelerate to the point that something truly astonishing happens.
“While our downside target for Bitcoin is $10,000 it would really be something if gold’s price grew bigger than Bitcoin’s price,” writes 22V technical analyst John Roque.
Yes, it would.
Write to Ben Levisohn at [email protected]
