Wed. Jan 26th, 2022

Bitcoin fell below $ 40,000 on Monday.

By Bloomberg

Bitcoin fell below $ 40,000 for the first time since September, putting it on track for its weakest start to a year since the earliest days of the digital alternative to money.

The original cryptocurrency fell by as much as 6% to $ 39,774 in New York trading, bringing its loss to about 14% this year. The decline is the largest for a start of the year since at least 2012. Ether climbed lower, while the Bloomberg Galaxy Crypto Index fell for a fourth day.

Daily chart showing that Bitcoin price drops below $ 40,000

“Cryptocurrencies are likely to remain under pressure as the Fed reduces its liquidity injections,” said Jay Hatfield, chief executive of Infrastructure Capital Advisors. “Bitcoin could end up below $ 20,000 by 2022.”

Bitcoin was created in the wake of the global financial crisis of 2008 by an anonymous individual or group that went through Satoshi Nakamoto. It first started trading in 2009 and pricing information from the early days is limited.

Annual graph of Bitcoin prices dating back to 2011

Bloomberg Intelligence’s Mike McGlone said $ 40,000 is an important level of digital support for the digital sign. Cryptocurrencies are a good barometer for the current reduction in risk appetite. But he predicts that Bitcoin will eventually come forward as the world becomes increasingly digital and the currency becomes the benchmark collateral.

The Covid-19 pandemic helped Bitcoin break into the mainstream further as institutions and retail investors became involved in the cryptocurrency market and its additional projects. Now that the Federal Reserve has become more fake, more risky assets such as stocks and digital assets have suffered.

“Stricter Fed policies affect not only interest rates, but also the equity risk premium as the Fed withdraws funds from the capital markets. Risky investments such as non-profit technology, meme stocks and cryptocurrencies are excessively affected compared to the rest of the market, as those investments are about twice as volatile as the overall market and therefore have twice the risk premium as the average stock, ” said Hatfield.

Noelle Acheson, head of market insights at Genesis Global Trading, said Bitcoin’s slump appears to be driven more by short-term traders of the currency than long-term holders.

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