Following last week’s remarkable rally, Bitcoin is now experiencing one of its steepest declines in recent months.
After starting the week at $18,742, the coin’s price surged to $22,537 on September 14, a 15% gain from its September 7 low. Since the market bottomed in June, this rally has been the strongest.
Bitcoin’s sharp 14% correction during the crash almost entirely negated this gain. Bitcoin’s value went from $22,536 to $19,735 in just two days.
Bitcoin’s link to the S&P 500 index is blamed for its recent drop in value. The Consumer Price Index report had been released by the US government a few days ago.
The data indicates that year-on-year inflation fell from 8.1% to 8.3%. Global financial markets were shaken by this report.
Bitcoin Shaken by CPI Data
After the report was released, both the equity and cryptocurrency markets felt the pain.
The global financial market followed the lead of the S&P 500 and lost 200 points. After a drop in the index, the crypto markets also fell.
Similar to the index’s 2972-point drop, the price of bitcoin fell. A sell-off in the cryptocurrency market was caused by this crash.
The drop is the result of more than this report, however. The US Federal Reserve is considering raising interest rates by 1 percentage point on higher-than-expected inflation raising concerns about the onset of a recession.
The contemplation of the Fed is spreading panic in the market, causing further declines in the value of stocks and cryptocurrencies.
As of this writing, Bitcoin broke above the 78.60 Fib level. This downward trend has put Bitcoin in a perilous situation.
BTC bulls need to reclaim $20,000 of turf
The loss of the $20,000 psychological support may send the price down to levels prior to the September 9 surge. And access to real-time data makes this possible.
The current Fear and Greed Index reading is 19, indicating extremely fearful market sentiment. The bulls need to regain the 78.60 Fib level if Bitcoin is to survive market concerns.
This previous support level can act as a market catalyst for recovery. If the bears outweigh the bulls, the price could fall to around $18,000 on September 7th.
Under current market conditions, this may not be true. As the S&P 500 continues to lose ground, Bitcoin could follow suit. The correlation coefficient of 0.69 indicates that there is still a correlation between the two markets.
The correlation coefficient fluctuates between 0.93 and 0.65 due to historical market activity.
If the crypto industry as a whole is to revive, market conditions must improve and bulls must strive for a sustainable recovery.
BTC total market cap at $384 billion on the daily chart | Source: TradingView.com Featured image Pixabay, Chart: TradingView.com (The analysis above represents the author's personal views and should not be construed as investment advice.)