As a result of the notable rally last week, Bitcoin is now experiencing one of its biggest declines in recent months.
After starting the week at $18,742, the coin jumped to $22.537 on September 14, a 15% increase from the September 7 low. Since the market bottomed out in June, this rally has been the strongest.
The sharp 14 percent correction in Bitcoin during the crash almost completely wiped out this gain. The value of Bitcoin dropped from $22,536 to $1,735 in just two days.
Bitcoin’s link to the S&P 500 has been blamed for the recent drop in its value. The Consumer Price Index report was released by the US government a few days ago.
The data indicated that inflation rose on an annual basis from 8.1% to 8.3%. Global financial markets were shaken by this report.
Bitcoin shaken by CPI data
After the report was released, the stock and cryptocurrency markets felt the pain.
Public financial markets followed the lead of the S&P 500 and fell 200 points. After the index fell, the cryptocurrency markets went into a downturn as well.
Similar to the 2,972 point drop in the index, the bitcoin price has fallen. This collapse caused a sell-off in the cryptocurrency market.
But this decline is the result of more than just this report. The US Federal Reserve is considering raising interest rates by one percentage point due to higher-than-expected inflation causing fears of a recession starting.
The Fed’s thinking sparks panic in the market, causing a further decline in the value of both stocks and cryptocurrencies.
As of this writing, Bitcoin has surpassed the 78.60 Fibonacci level. This downtrend has put Bitcoin in a precarious position.
BTC Bulls Should Reclaim $20K From Grass
The loss of the psychological support of $20,000 could cause the price to collapse to levels before the September 9th rally. And access to real-time data makes this possible.
The current reading of the Fear and Greed Index is 19, which indicates a very frightening market sentiment. Bulls must recover to the 78.60 Fibonacci level if Bitcoin is to survive market fears.
This previous support level could act as a catalyst for the market to recover. If the bears prevail over the bulls, the price could drop to around $18,000 on September 7.
Depending on current market conditions, this may not be true. As the S&P 500 continues to slide, Bitcoin may follow suit. A correlation coefficient of 0.69 indicates that there is still a correlation between the two markets.
The correlation coefficient fluctuates between 0.93 and 0.65 due to historical market activity.
If the cryptocurrency industry as a whole is to rebound, market conditions must improve and the bulls must strive for a sustainable recovery.
BTC total market cap at $384 billion on the daily chart | Source: TradingView.com Featured image Pixabay, Chart: TradingView.com (The analysis above represents the author's personal views and should not be construed as investment advice.)