Is another wave of crypto sell-offs ahead of us?
Looking at the quotations of the oldest virtual currency, we notice that its rate has lowered over the last seven months by over 50,000 dollars, i.e. over 74% - from $69,000 to below $18,000, the lowest level since December 2020.
This sale stopped around the technical support level based on the December 2017 peaks. However, the demand response in that support area was exceptionally modest.
Within nine days, Bitcoin increased as much as it previously fell in less than three days. Small movement dynamics is one of the characteristics of correction movements, so one can conclude that Bitcoin will return to the downward path after the rebound is over.
Statistics also support the continuation of the downward movement:
- In 2011, after the so-called 'first burst of the bubble', BTC fell by almost 94%.
- In 2013, when the second bubble burst, the decline amounted to over 83%.
- In 2014, when the third bubble burst, Bitcoin fell by almost 93%.
- In 2017, when the fourth bubble burst, the decline amounted to nearly 84%.
So it turns out the current decline of 74% has not even matched the previous sell-offs observed over the years on the quotations of the oldest virtual currency. If Bitcoin dropped to $12,000, the range of the depreciation observed since November would exceed 82%.
Another argument is the policy of central banks, which raise interest rates in response to high inflation, contributing to a decrease in liquidity, which leads to a decline in the quotations of risky assets such as stocks or cryptocurrencies.
Reuters economists believe the Federal Reserve would make five more increases in interest rates in this cycle. It would raise the federal funds' rates by 75 basis points in July, half a percentage point in September, and will return to increases by a quarter of a percentage point earliest in November.
According to experts, the Fed will stop the increases in the second and third quarters of 2023 and then cut rates by 25 basis points in the last quarter of next year.
Looking at the Ethereum quotes, we notice that its price has dropped by almost $4,000, i.e. nearly 82%, from almost $4,900 to below $900, the lowest level since early January 2021.
This sale stopped in the area of technical support of $1,000. If the gains continue, the ETH could return to the previously defeated support (now resistance) area of $1,400.
However, this resistance coincides with the measurement of 50% Fibonacci retracement from the earlier downward move. Considering the relatively low dynamics of the current upward rebound, one can conclude that this is probably only another correction in a downward trend. Perhaps after the correction, there will be a more significant supply pressure, which will trigger another move toward $1,000 or even further towards $800, where there is another technical support level.
Looking at the Litecoin quotations, we can notice that the price of this cryptocurrency increased between June 14 and 26 this year by almost 50%, thus returning to the area of previously defeated support (now resistance) of $61.
It is worth noting that this level crosses the downward trend line, and the first supply reaction has already appeared around this confluence. Therefore, if this zone is rejected, the LTC rate could return to the downward path, to around $39 and then $30 - the two closest support levels.
AVAX has increased by over 60%, returning to the previously defeated support (now resistance) area of $22. It is worth noting, however, that this level coincides with the golden ratio, i.e. measuring 61.8%. Fibonacci retracement from the earlier downward move, and in its vicinity, the first supply reaction appeared last Sunday.
So if this zone is permanently rejected, the price of this cryptocurrency could return to the path of decline; The barrier of 14$ or further technical support of $9.5 seems possible.