Bitcoin market enters ‘extreme fear’ as price dips below $40k

Crypto analysts warn a ‘sense of nervousness’ has crept into the market

Bitcoin hit both the August and September markers on PlanB’s price prediction model (Getty Images/iStockphoto)

Bitcoin has slipped more than 15 per cent over the last week, prompting the market to enter a period of “extreme fear”, according to one indicator.

The price fall coincides with a broader downturn across global financial markets brought about by geopolitical crises and caution over concerns that the US Federal Reserve will tighten monetary policy.

Bitcoin briefly dipped below $40,000 on Monday evening but has since returned and appears to have stabilised just above it. The price point could prove a key area of resistance over the coming days, according to some crypto market analysts.

“A sense of nervousness has crept into the market amid low volumes over the weekend,” the trading team at the crypto exchange Bitfinex wrote in a note shared with The Independent.

“The prospect of more interest rate hikes and increasing concerns over the economic environment may become recurring themes for this year. As is the case with the stock market, we may see more outbreaks of episodic volatility in the months to come.”

The price slide comes after Bitcoin 2022 – dubbed the biggest bitcoin event in history – in Miami, Florida, last week, during which notable attendees like PayPal founder Peter Thiel predicted that bitcoin could see a stratospheric increase in value in the next few years.

The hype building up to the conference may have contributed to artificially inflating the price of bitcoin, with the hope of major announcements similar to the one made by El Salvador President Nayib Bukele at the same event last year.

The news that the Central American country would become the first in the world to adopt the cryptocurrency as a legal form of tender sparked a record-breaking price rally that peaked in November 2021 above $68,000.

President Bukele was supposed to be one of the keynote speakers at this year’s conference but pulled out the night before due to “unforeseen circumstances”.

His absence, and the lack of similarly industry-shaking announcements this year, likely contributed to the market cool down.

“Bitcoin is still in the upper half of the range it has traded in 2022, meaning if it can hold its level above $40,000, then confidence could return to the market,” said Simon Peters, an analyst at the online trading platform eToro.

“What is clear is the ebullience of the past few weeks led to the token being overbought, and is now suffering the consequences of that... Unlike in past years, nothing of serious note [at Bitcoin 2022] seems to have buoyed the price this time around.”