Bitcoin and other cryptocurrencies were weaker on Monday, in line with the stock market, extending recent declines ahead of what could be a turbulent week of trading.
The price of BitcoinBTCUSD –1.58% shed less than 1% over the past 24 hours to around $21,200, off earlier daily lows below $21,000. The largest digital asset started its latest plunge on Friday, when it fell from above $23,000 to below $21,000, and continues to trade at less than one-third of its all-time high from November 2021 near $69,000.
“Bitcoin has fallen by over 10% since Friday, currently trading at around $20,900 and back below the 200 weekly moving average,” Marcus Sotiriou, an analyst at digital asset broker GlobalBlock, wrote in a note.
“Some believe that the significant sell-off on Friday was caused by Celsius Network, who are bankrupt, receiving approval to sell mined Bitcoin to cover their operations,” Sotiriou added. “It has been speculated that Celsius sold 7,000 Bitcoin on FTX spot [exchange], which led to a cascade of liquidations.”
Liquidations refer to the forced selling by brokers of traders’ positions in the crypto futures market, which dominates the digital trading space. Positions on margin—made with borrowed money—can be sold in the blink of an eye if the value of collateral, which is typically Bitcoin, falls below a required level.
If Celsius sold 7,000 Bitcoin—worth some $150 million—it would have added significant sell pressure to a crypto market that was already wobbly and could have caused the price of Bitcoin to fall enough to trigger a mass of liquidations. Indeed, $210 million worth of Bitcoin futures contracts were liquidated on Friday, according to data from Coinglass, the most since a mid-June selloff that saw Bitcoin drop from $30,000 to $20,000.
Cryptos were lower in line with the stock market. While they should theoretically be uncorrelated assets, cryptocurrencies like Bitcoin have shown themselves to be largely linked to swings in other risk-sensitive assets, like stocks, and especially tech stocks. The tech-heavy Nasdaq Composite index lost 2% on Friday and futures tracking the index implied losses of 1.5% on Monday; the S&P 500 index was similarly weak.
Investors are looking ahead to the Jackson Hole Economic Symposium this week, especially Federal Reserve Chair Jerome Powell’s speech. The Fed’s monetary policy pathway continues to dominate market sentiment, with traders’ expectations constantly shifting over to what extent the central bank will continue to raise interest rates, even amid the risk of recession.
A recent rally in stocks has come alongside optimism that the Fed could begin lowering rates in 2023, but this narrative has been challenged by messaging from officials at the central bank that fighting inflation at a multidecade high remains a key priority. Powell’s remarks at Jackson Hole could add clarity to the market’s expectations for monetary policy over the coming months—potentially spurring a rally or more declines.
“From a macro perspective, the market will likely be on alert for Fed chair Powell’s Jackson Hole speech scheduled on Friday, especially since multiple regional Fed presidents have maintained their hawkish outlook for the September [decision on rates],” Yuya Hasegawa, an analyst at crypto exchange Bitbank, wrote in a note.
“Bitcoin’s outlook for the week is quite unclear and the price will likely fluctuate within a narrow range until Powell’s speech,” Hasegawa added. “The $20,000 psychological level could be a reliable support for the price and $22,000 will likely be a resistance until then.”
Beyond Bitcoin, EtherETHUSD –3.72% —the second-largest crypto—tumbled 2.5%. Altcoins, or smaller tokens, were also weak, as Cardano and SolanaSOLUSD –5.61% lost 2% and 3%, respectively. Memecoins—initially internet jokes—were similarly lower, with DogecoinDOGEUSD –4.65% 3% into the red and Shiba InuSHIBUSD –3.71% down 1%.