Bitcoin (BTC) broke below two key support levels on Thursday as a market rout intensified. While its latest crash was directly triggered by higher-than-expected U.S. inflation data, there were also other factors driving investors out of crypto.
BTC is trading down 15% in the past 24 hours at $26,848- its lowest level since December 2020. The token is now on the verge of losing nearly 66% since a record high hit in November.
But the token’s heavy losses may be bringing it closer to a bottom. Veteran analyst Peter Brandt sees $27,000 as a possible low.
U.S. inflation the initial trigger
BTC was trading around $31,000 prior to the U.S. CPI reading on Wednesday. But the token plummeted to $28,000 within minutes after the data came in higher than expected.
While the reading was slightly below March’s data, it still shows that inflation will take much longer to cool. This is bound to spur more interest rate hikes by the Federal Reserve- an extremely negative scenario for BTC.
The Fed’s hike earlier this month had also caused heavy losses in BTC.
Stock markets tumble, BTC follows
U.S. inflation data caused a large tumble in stock markets as well. The S&P 500 slumped 1.7%, while the Nasdaq Composite- a closer parallel for BTC, tumbled over 3%.
Given that BTC’s correlation with U.S. stock markets is at a record high, it seems likely that losses in equities spilled over into the token. Asian stocks are also down heavily on Thursday, providing further downside pressure for BTC.
Terra crash undermines faith in crypto
The Terra blockchain has imploded in value over the past week. The fact that a once top-10 crypto, LUNA, could crash 99% in a week, has shaken investor confidence in crypto.
While there wasn’t a direct price reaction to LUNA and UST’s fall from grace, the move is likely to have further dented sentiment in crypto.
Overall, with equity markets also crashing, sentiment towards risk-heavy assets such as BTC is at record lows. While this may represent a buying opportunity, the pace of losses in risk markets is yet to slow down.
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