Bitcoin falls to lowest this month with risk of further declines

Bitcoin dropped to its lowest level in three weeks as equities continued to trend lower.

The largest cryptocurrency declined as much as 1.9% on Tuesday to $16,277, the lowest level since November 29. Second-largest Ether fell as much as 2.1% to the lowest since November 28. Those moves come as the S&P 500 slid for a fourth straight session amid nervousness about the Federal Reserve’s potential rate-hike path.

“We expect a retest of the November lows, near $15 600, in the coming weeks” after a failed test of levels in the $17 000 to $18 000 range, said Katie Stockton, founder of Fairlead Strategies LLC. “We ultimately expect Bitcoin to make a lower low, increasing risk to long-term support near $13 900.”

Cryptocurrencies have had a harsh 2022 after reaching record highs late last year, buffeted by everything from the Fed’s policy tightening to the implosions of the Terra/Luna ecosystem, hedge funds Three Arrows Capital and exchange FTX. They’ve been highly correlated with US equities for a couple of years now, and Fundstrat digital-asset strategist Sean Farrell said in a note that was a reason for the Monday crypto declines.

Traders may also need to be on the lookout for the situations that come with holiday-season trading, according to Bitfinex.

“As we approach the end of the year many firms and traders take a break, however the slowdown in trading activity brings with it the risk of higher volatility, given the declines in trading volume and liquidity,” Bitfinex analysts said in a report. “This is already evident on the lower timeframes, even if the higher timeframe price action appears to be in a range between $16 000 and $18 000.”

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