Lowest level in 21 months: Bitcoin falls to below $56,000

Most recently, Bitcoin was trading at a good $58,600, which is back within the range between $58,000 and almost $61,000 that has been in effect for almost a week. At the beginning of June, the cryptocurrency was still trading at well over $70,000.

Bitcoin is currently suffering in particular from the risk of inflation caused by the now high energy prices in the wake of the Iran war. There are fears that the US Federal Reserve could counteract this with higher key interest rates in order to combat second-round effects. This, in turn, would be bad news for investors involved in risky assets such as cryptocurrencies that do not pay interest.

Indication of possible US interest rate hike

Only recently did US Federal Reserve Chairman Kevin Warsh particularly emphasize the importance of price stability during his first appearance as chairman of the central bank. On the financial markets, this was interpreted as an indication of a possible interest rate increase later in the year. Geopolitical risks and an overall more cautious willingness to take risks on the part of investors would also be a burden on Bitcoin, added market expert Timo Emden from Emden Research. At the same time, the cryptocurrency is increasingly competing with AI-driven technology stocks for fresh capital. The fact that even bargain hunters were now operating with the handbrake on in such an environment underlines the uncertain situation, Emden continued. If the downward spiral continues to rotate, it could trigger another sell-off.

From a market perspective, the fact that Bitcoin clearly broke the 200-week average line in the middle of the week had a negative impact. It is a benchmark for very long-term development. A sustained fall below this line can signal a bear market, i.e. a longer period of falling prices.