Bitcoin’s (BTC) recent losses saw the token plummet below a key support level, likely setting it up for more declines in the near future.
BTC fell below the key $20,000 level on Saturday, hitting its lowest level since late-2020. It is now trading slightly above $19,000, after falling briefly falling below that level.
The token’s losses this week saw it diverge even further from equity markets. While stocks appear to have limited some of their recent losses, a slew of large liquidations and uncertainty over the crypto market pushed BTC even lower.
The token now faces even more losses as more traders get liquidated in the market.
BTC now lagging stock markets
Today’s losses bring BTC down about 72% from its record high hit in November 2021, at nearly $69,000. In comparison, the Nasdaq 100- BTC’s closest stock market parallel- is down 28% from its December 2021 high.
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In year-to-date terms, Bitcoin has lost roughly 59%, compared to a 32% loss in the Nasdaq. The difference marks an end to the BTC-Nasdaq correlation seen over the past two years.
The token has fared even worse than non-technology stocks. The Dow Jones Industrial Average is down 18% so far this year.
Broader market weakness has been driven largely by concerns over rising inflation and interest rate hikes by the Federal Reserve. But BTC’s losses have been magnified by trouble in the crypto space.
Why the divergence?
May’s Terra crash, which wiped out about $40 billion of investor funds, has shaken investor faith in crypto. The situation was only worsened as major lender Celsius warned of a liquidity crunch, while hedge fund Three Arrows Capital faces potential insolvency.
Mass liquidations of Celsius and Three Arrows positions also saw BTC being dumped on the open market, further denting prices.
With more liquidations to go, BTC is likely to experience even further downside. There are few factors that could spur a recovery at the moment.
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