Bitcoin (BTC) slumped further on Wednesday ahead of a widely anticipated interest rate hike by the Federal Reserve later in the day.
BTC is trading at $21,200- down 4% in the past 24 hours. The world’s largest cryptocurrency has plummeted 30% since last week after a higher-than-expected U.S. inflation reading.
Focus now turns to how the token could react to a Fed rate hike later in the day. BTC had tumbled when the Fed raised rates in early-May, and likely faces a similar capitulation this time.
Technical indicators show BTC is primed to sink as low as $13,000 if this downtrend continues. Broader uncertainty over the crypto industry is also causing weakness in the token.
BTC should fear the Fed
BTC capitulated over 8% after the Fed raised rates on May 4. It then went on to slump another 28% to as low as $28,000 in the next week, as a crypto rout intensified.
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Last time, the Fed raised rates by 50 basis points (bps). Now, given the heated inflation figures, traders are positioning for a 75 bps hike by the central bank, according to data from CME Group. It would be the Fed’s sharpest hike in recent history.
The move would unwind two years of loose monetary policy that had boosted crypto markets to record highs. It also signals that the central bank is concerned over a potential recession in the wake of rising inflation.
A recession spells even more trouble for retail-exposed, risk-heavy assets such as BTC and crypto.
How low can Bitcoin go?
Veteran trader Peter Brandt recently predicted that BTC could go as low as $13,000, as it plays out a double top pattern. A negative signal from the Fed is likely to add further credence to this prediction.
BTC falling below $20,000 is set to trigger a cascade of liquidations, which in turn will see even more of the token being dumped on the open market.
The token has seen nearly $1 billion worth of positions liquidated in the past two days, with the trend likely to continue.
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