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Bitcoin’s (BTC) price slid another 7.8% within the past 24 hours to a daily low of $18,420.
Although the dominant crypto had recovered slightly above $19.2K at the time of writing, this is the second significant decline in the past week, which brought Bitcoin down by more than 18% or to lows not seen since the end of 2020.
The decline came as nearly $400 million worth of Bitcoin long spot orders have been liquidated since early Sunday, September 18, registering significantly high numbers two days in a row, according to data from Coinglass.
As Bitcoin dominance declined to 39.3%, the lowest level since the middle of 2018, the panic quickly spread across the broader digital asset market.
The total value of the crypto market dropped to $903.2 billion as the major coins including Ethereum (ETH), Ripple (XRP), and Cardano (ADA) recorded losses in the double digits. According to the Crypto Fear and Greed Index, the market returned to “extreme fear” territory, dropping by six points in a single day.
Fed Rate Hike Fears Catalyze Crypto Crash
Bitcoin’s drop coincided with the broader decline in stock markets, which also fell early on Monday as investors await another major interest rate hike announcement from the United States Federal Reserve (Fed) on Wednesday, September 21.
The markets fear that the upcoming interest rate hike could be one for the history books as the biggest in the past 40 years. Financial experts forecast that the US central bank may hike interest rates by 0.75 percentage points to 3% or even hike them “by an unprecedented one full percentage point to 3.25%” to cool off the 8.3% inflation.
Investors also fear the news from the Bank of England, which is expected to announce its interest rate hike by 0.75 percentage points this Thursday, September 22. In addition to that, other central banks across the world are also on their way to increasing interest rates. Although the move is said to be aimed at stopping the historically high inflation levels, it is consequently bringing volatility to financial markets.
Bearish Sentiment Dominates
Contrary to the popular expectations of being a safe-haven asset, Bitcoin is moving in positive correlation, or in tandem, with the stock market prices. This means that the dominant crypto remains highly reactive to stock market movements and the macroeconomic environment, like global recession fears and tightening monetary policy.
When looking at Bitcoin options, or investment contracts that give the right to buy or sell an asset at a specific price, sellers are dominating the BTC option market for the end of September. On the other hand, September historically has been considered a bearish month for Bitcoin prices.
In addition to that, the crypto space is widely discussing Goldman Sachs economists’ warning that Bitcoin could potentially fall to new lows of $12,000 if the US central bank hikes the interest rates harshly.
On the Flipside
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