Bitcoin swoons below $32K as investors hunt for new bottom

·Senior Reporter
·3 min read

Bitcoin hit its lowest point since July of last year on Monday, following a rout over the weekend that saw investors take $305 billion out of cryptocurrencies and other digital assets.

The cryptocurrency was trading around $31,000 per coin as of Monday afternoon, down 21% from $39,500 on last Wednesday following a brief “relief rally” after the Federal Reserve’s policy-making meeting, large institutional investors

Over the weekend, bitcoin and other cryptocurrencies surpassed their year-to-date lows amid a wider sell-off of riskier assets. Between Sunday and Monday afternoon, the market capitalization of all crypto assets had sold off 9.2% and currently holds $1.47 trillion.

“Our clients have been trimming their positions since last week. Many are still seeking some price stability before re-entering the market,” Shawn Egger, global head of execution services with cryptocurrency prime brokerage SFOX, told Yahoo Finance, noting that many of his clients took “their chips off the table” in “large block-sell orders.”

“The global and geopolitical backdrop look quite poor and we are anticipating a turbulent May and June,” Egger added.

Bitcoin is down 18.6% in the last week and 10% lower in the past 24 hours, according to Coinmarketcap, while some investors remain unconvinced the asset hast found its bottom given its steady down in the last six days.

The second largest cryptocurrency, ether (ETH), has faced slightly worse losses over the past week, down 19%. It's changing hands at $2,292, down from $2,931 per coin since Thursday.

Bitcoin swoons, falls below $33,000.
Bitcoin falls below $33,000. (Photo: Getty)

During a cycle of tightening monetary policy, it's not abundantly clear how cryptocurrencies will hold up relative to other assets, but as long as they continue to trade like risk-on assets, their performance appears to mirror a more exaggerated version of the stock market’s sell-off.

Since central banks globally lowered interest rates to shore up people and businesses during the pandemic, more institutions have begun trading cryptocurrencies. The trends contribute to why bitcoin has maintained an increasing correlation with risk-on equities, particularly technology stocks.

Though its correlation to the Nasdaq-100 ebbs and flows, last month one analyst noted that if its high correlation to technology stocks is sustained, bitcoin would be dragged down significantly during a cycle of monetary tightening.

Kaiko Research
Kaiko Research

According to crypto analysis firm Kaiko, bitcoin’s 30-day correlation to the Nasdaq is at all-time highs, on pace to match its lockstep movement with ether.

Ylann Guez, a senior trader with crypto trading firm, Efficient Frontier, told Yahoo Finance that he doesn’t believe bitcoin has found its bottom yet. After dropping to a low of $30,516 before recovering, bitcoin’s next base for strong buyer support appears to be $30,000, according to Guez, who reasoned its next backstop could be as low as $20,000.

Once BTC drops below the $30,000 psychological point, the movement should trigger a “capitulation trade,” Guez explained.

If not, "next stop, $28,000 and $18,000 thereafter, unfortunately," SFOX's Egger added.

David Hollerith covers cryptocurrency for Yahoo Finance. Follow him @dshollers.

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