Bitcoin continues to trade around the $20,000 level, keeping investors informed of where the price is headed next.
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Bitcoin is up 10% on Monday after a sharp weekend sell-off, but it continues to fluctuate around the $20,000 mark, keeping investors on their toes.
According to data from CoinDesk, the world’s largest cryptocurrency was trading at $20,648.50 as of 05:14 ET. In the last 24 hours, Bitcoin had surged above $20,000 and dropped as low as $18,261.75.
Over the weekend, Bitcoin had fallen as low as $17,601.58.
Meanwhile, Ether is up more than 16% to trade above $1,131.63 as of 05:14 ET, according to CoinDesk data.
While the recovery is being welcomed by investors, Bitcoin is still around 70% below its all-time high, hit in November of last year, and is down 57% year-to-date.
“Dead Cat Jumps”
With Bitcoin failing to sustain convincingly above $20,000, industry watchers said the rally could be short-lived.
Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, told CNBC that if bitcoin price doesn’t close above $23,000 on a daily basis, “chances are it’s a dead jump.”
“We’re oversold, so a bounce was expected,” he said.
The broader cryptocurrency market has been plagued by a slew of issues over the past few weeks, starting with the collapse of algorithmic stablecoin TerraUSD and related token Luna.
Attention is now turning to crypto lending companies that promise users high returns for depositing their digital coins. Last week, Celsius, a company with 1.7 million customers and nearly $12 billion in crypto assets under management, suspended paying out funds to customers, sparking concerns that it is insolvent.
Cryptocurrency companies have announced rounds of layoffs amid the market downturn. Coinbase, a crypto wallet and exchange, announced last week that it will cut 18% of its full-time jobs. A lending company called BlockFi said last week it was laying off a fifth of its workforce.
Macroeconomic factors such as high inflation and upcoming US Federal Reserve rate hikes are also weighing on the market.
“With inflation on the doorstep and rate hikes on the horizon, the risks of a recession around the corner are high,” CryptoCompare CEO Charles Hayter told CNBC via email.
“The push-me-pull you from higher interest rates, which weakens homeowners’ money being pawned, means people are psychologically backing down and backing down, and digital assets are suffering.”
“Coupled with this, the retreat has exposed a number of systemic issues in the digital asset ecosystem.”
Market bottom?
Given the sharp drop in cryptocurrency prices over the past few weeks, some observers have said that a market bottom may be near.
Giles Keating, director of Bitcoin Suisse, told CNBC’s Squawk Box Europe on Monday that “we are close to a point where some of the actual excess leverage has now been forced out of the system and a bottom can form.” “
Leverage refers to trading where investors effectively use borrowed money to make trades. This means investors can get greater exposure to positions with less initial capital. However, this is considered a risky trading medium as investors need to ensure they have enough capital to meet so-called margin requirements. If they fail to do so, their position will be automatically liquidated. These liquidations are seen as an important factor in market movements.
Keating said there’s still a risk of further liquidation, but he thinks the bulk of the sale is over.
“Now some people are warning that we’re not there yet and that if we dip significantly lower, we’d see another wave of liquidations,” Keating said.
“There is always this risk. But given these very, very large double-digit rebounds that we have seen in bitcoin, especially ether, I think that I think this was a sign that a lot of these really big liquidations are now done and that the base is really is formed.”