Bitcoin prices have crashed more than 50% since the start of the year, losing more than 17% in the past 24 hours alone and the rout appears to be ongoing. The selloff was sparked on Friday when the Bureau of Labor Statistics announced that the CPI had increased 8.6% in May compared to the same month last year.
Big blow to the markets
The $29,000 price level was a critical support for Bitcoin having held the coin through tumultuous trading periods including the Terra collapse. However, this level was finally broken through on Saturday after the devastating inflation report announced on Friday. Investors had expected inflation to decrease from 8.3% in April YoY to 8.2% in May, but instead inflation increased to 8.6% YoY. Core inflation had also gone up compared to analysts’ expectations.
Despite being previously considered a hedge against inflation and a safe haven asset, Bitcoin has also suffered from the news and things are not looking up any time soon. On Monday, Bitcoin fell below $25,000 for the first time since December 2020 and now the fear is that it will continue trending downward toward its $20,000 high of 2017.
How low can it go?
One of Bitcoin’s harshest critics, Peter Schiff, tweeted after the CPI that Bitcoin was going to crash to $20,000 while Ethereum crashed to $1,000. So far, the prediction is on track to becoming true as BTC continues to slip further.
And even if you might be inclined to dismiss these sentiments as biased, consider Peter Brandt’s prediction where he imagines that Bitcoin is unlikely to recover soon. He believes that the $20,000 price point is the next strongest support for Bitcoin, although he thinks it’s strong enough to hold.
Because the Fed is expected to stick to a 50 basis point increase in interest this week, it won’t be enough to staunch the bleed in Bitcoin. Even worse, Bitcoin could drop further to as low as $12,700 as predicted by Brandt.