Bitcoin (BTC) fell below $30,000 early Tuesday as both traditional financial markets and cryptocurrencies suffered from a sell-off caused by the U.S. Federal Reserve's aggressive monetary tightening as well as recession fears.
The latest decline left bitcoin at a 10-month low and its lowest price this year. The last time the largest cryptocurrency by market cap fell below the $30,000 threshold was on July 20, 2021, when it hit $29,301 before rebounding.
While the cryptocurrency has regained some poise since then, it remains below the former support-turned-resistance of January lows near $32,900, with technical charts indicating the path of least resistance is to the downside.
"The breakdown below the weekly cloud reverses the uptrend launched at the March 2020 low, supporting a long-term bearish bias," Katie Stockton, technical analyst at Fairlead Strategies said in a weekly newsletter published Monday. "Intermediate-term oversold conditions have been overruled by negative momentum, which should allow for downside follow through with next support near $27.2K per a 61.8% Fibonacci retracement level."
Programmable blockchain Terra's LUNA token remains under pressure following Monday's 52% slide to $30. Terra's UST, the world's biggest decentralized stablecoin, has recovered to $0.90 from the overnight low of $0.60.
"UST has recovered to somewhere near $0.90, after some mad scrambling by its founders to shore it up by selling reserves of bitcoin, Ethereum, and deploying other treasury assets," Tim Frost, founder and CEO of Yield App, said in an email. "With LUNA down nearly 50% over the last 24 hours though, it’s unlikely this is going to prove a long-term solution if the panic-selling continues."
Frost added that decentralized stablecoins like UST that rely on theoretical pegs instead of hard cash are vulnerable to a good old-fashioned bank run. "There is little anybody can do when investors start heading for the door en masse other than join the stampede and accept a huge loss, or turn their devices off, head to the bar and come back in a few weeks' time. Or indeed, perhaps come back in a few months' time, as there is now little doubt we are in the midst of the most aggressive bear market since 2018," Frost noted.
Ilan Solot, a partner at Tagus Multi-Strategy Fund, said UST's recent volatility is likely to attract unwanted attention from regulators. "This was a serious event involving the third largest stablecoin and sending ripples across the space. However, if we get through this with no systemic damage aside from a few days of stress, it will also be a good argument for the anti-fragile camp. Observers will take the narrative that confirms their biases, as always," Solot said in an email.
UST lost its 1:1 dollar peg over the weekend after multi-million dollar UST sales on Curve and Binance and crashed hard on Monday, supposedly adding to downside pressures around bitcoin.
Bottom in?
While price-volume studies suggest bitcoin may be close to a bottom, an onchain indicator that has historically marked major trend reversals indicates otherwise.
Bitcoin’s market value to realized value (MVRV) Z-score stood at 0.45 at press time, indicating room for the further price decline. In the past, a below-zero MVRV Z-score (green area) has marked market bottoms, while a reading above seven has marked tops, according to blockchain analytics firm Glassnode.
Deeper losses may be seen if China's producer price index, scheduled for release Wednesday, rises faster than expected, bolstering inflation worries and validating Federal Reserve's hawkish stance.
China's PPI is closely watched as a leading indicator for global consumer inflation.
