Bitcoin experienced a significant decline on Friday, dropping below its 200-day moving average. Investors are becoming increasingly worried about the possibility of high global interest rates persisting, which could potentially lead to an economic slowdown.
The cryptocurrency BTCUSD observed a sudden downturn of over 7% in the past 24 hours. This decrease follows a period of subdued trading volume and decreased volatility that has persisted for several months. On Thursday, the coin reached a low point of $25,392.
Although Bitcoin has shown a 60% increase in value this year, it remains more than 60% below its all-time high in 2021, according to data from CoinDesk.
It is crucial to keep an eye on the next key support level at $25,200, as highlighted by Katie Stockton, founder and managing partner of Fairlead Strategies. She also identifies a secondary support level for bitcoin around $20,600.
The reduced trading volume and muted volatility over the past few months have left Bitcoin susceptible to market manipulation from large trades, according to James Butterfill, head of research at CoinShares.
Analysts at QCP Capital have stated that the decline in Bitcoin was primarily driven by significant liquidations of perpetual futures on options exchanges Deribit and OKX.
From a macroeconomic perspective, the yield on the 10-year Treasury note BX:TMUBMUSD10Y reached its highest level in nearly 16 years on Thursday. This has escalated concerns among investors that global central banks may maintain elevated levels of interest rates for an extended period.
Elevated interest rates generally reduce the appeal of risky investments, such as cryptocurrencies like Bitcoin.
James Butterfill noted that Bitcoin has often been a leading indicator of broader market crashes in recent years. Therefore, the current decline in Bitcoin may potentially signal a broader downturn in other asset classes.
On Friday, U.S. stocks experienced mostly negative trading. The Dow Jones Industrial Average remained unchanged, while the S&P 500 dipped by 0.1% and the Nasdaq Composite fell by 0.3%, according to FactSet data.