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Bitcoin Is at Risk of Plunging Below Its 2022 Low. Where Cryptos Go From Here.

This illustration photograph taken on July 19, 2021 in Istanbul shows a physical banknote and coin imitations of the Bitcoin crypto currency. (Photo by Ozan KOSE / AFP) (Photo by OZAN KOSE/AFP via Getty Images)


AFP via Getty Images

Bitcoin
and other cryptocurrencies were falling amid a wider market rout that exerted the most pressure on risk-sensitive assets. Cryptos recently have shown relative resilience, but that narrative was collapsing as tokens sold off even faster than stocks.

The price of Bitcoin has lost 7% over the past 24 hours to $18,750, coming precipitously close to its yearly low below $18,500. It marks a sharp turn for the largest digital asset, which was trading near $20,500 on Tuesday amid optimism among crypto traders that Bitcoin had hit its bottom in this bear market.

“Bitcoin was showing remarkable resilience at one point on Tuesday, trading more than 5% higher and comfortably outperforming the broader market in a manner that was very impressive. Unfortunately, it didn’t last long,” said Craig Erlam, an analyst at broker Oanda. “The risk environment is very unfavourable but we are seeing substantial support around $17,500-18,500. If that can hold, the rebound could be strong. The question is how long can it hold out if risk assets continue to head lower.”

Generally, cryptos have shown themselves to be correlated to other risk-sensitive assets, falling in tandem with the
Dow Jones Industrial Average
and
S&P 500
this year amid a gloomy macro outlook that has dampened investors’ appetite for risk. 

But recent strength in Bitcoin has come in the face of weakness in stocks, with analysts eyeing fundamental indicators in the crypto market suggesting that digital assets could climb higher. That may be true. But the biggest risk for Bitcoin remains its vulnerability to wider market sentiment, and tokens were plunging Wednesday along with stock indexes around the world.

Beyond Bitcoin,
Ether
—the second-largest crypto—fell 7% to $1,275. Smaller cryptos, or altcoins, were similarly weak, with
Solana
down 7% and
Cardano
6% into the red. Memecoins also were in the red, with
Dogecoin
shedding 4% and
Shiba Inu
losing 3%.

Write to Jack Denton at jack.denton@dowjones.com


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