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The Crypto Market is Down — Why Are Prices Falling?

Denis Goncharenko

Bitcoin price had fallen as high as 10.7 percent earlier this week, pushing it to below $43,000, and then to its lowest point since August's beginning. Ether was briefly below $3,000. The most well-known DeFi tokens have seen some of the most notable decreases: Cardano fell more than 10% in the last 24 hours, and so did Dogecoin and Polkadot dropped around 16%, as per CoinMarketCap.com.

The losses were mirrored by the volatility on the global market as investors assessed the potential risks posed by Evergrande's debt problems and next week's Federal Reserve meeting. The S&P 500 dropped 1.7 percent during its most tense session since May, and European equity markets fell the most in the past two months.

Some have attributed the recent decline to the ongoing Evergrande crisis in China that has already caused chaos in the market sectors that are accustomed to it. Analysts have indicated that a turbulent week ahead, including an eventual pullback that could be the low of $41,000.

The rapidity of the crash was likely to be accelerated by the fact that nearly 272,000 investors saw their accounts wiped out in the last 24 hours, which is about $1.3 billion in crypto, as per data from Bybt the crypto futures exchange and platform for information.

The occurrence has hit brokerage companies, as well, many of which had to provide a comprehensive explanation to their clients of what happened and why it has happened. Almost all of the service providers listed on BitcoinCapital have seen active trading of the most popular cryptos during the past few hours. Even though the picture seems worrying, experts still hold hopes.

Analysts from Chartists believe Bitcoin could be able to test its 100-day moving mean, which is currently around $40,655. If it falls to that point the coin could find support at $40,000. But other signals suggest that it's likely to get an opportunity to rebound: the currency dropped below the lower limit of the Trading Envelope indicator, suggesting that it fell too much, too quickly. The one-day Relative Strength Index (RSI) at 39 indicates that it is moving towards oversold levels.

Investors think that although the connection between tech stocks and Bitcoin is logical because both kinds of investments are considered attractive to the same investor group that is tech-savvy, strong correlations are also being observed for small-cap stocks as well as those in the S&P 500. It's likely because Bitcoin is more integrated into the global financial market and is more able to respond to changes in risk appetite which determines the global mood.

The president of El Salvador Nayib Bukele claimed that the nation has "bought the dip" with Bitcoin by adding 150 tokens, which brought its total assets to 700, which is around $32 million, based on the current price. El Salvador is currently implementing Bitcoin as a legal tender, a move that was met with technical issues and protests.

"Not all investors are selling," said Valkyrie's Wald.

El Salvador's enthusiastic embrace of Bitcoin is among the main reasons that prices have been rising and recently hit the four-month mark. But, the market has a long way to go before it can recover losses after the selloff that occurred in May.

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