On Wednesday morning, bitcoin was trading below the $19,000 mark, which brought the top crypto in the world to its lowest level recorded since June.
This was after global stock markets saw a drop and the US dollar continued to strengthen. The market capitalization of the whole crypto market also fell below the $1 trillion threshold, as there was a sell-off in numerous coins.
CoinDesk reported that Bitcoin had lost almost 5% to trade at $18,746.50. Even though Ether had managed to surpass the gains of Bitcoin in recent months, it also dropped by 9% to reach $1,513.64.
Global central banks are currently trying to rein in high inflation with monetary policy tightening. The US Federal Reserve has also hiked the interest rate several times in this year.
It has increased the interest rate by 225 basis points so far and further hikes are also expected before the year is out.
The US dollar has strengthened because of the policy tightening by the Fed, which has brought down risky assets. There has also been a rise in the 10-year US government bond yields.
Bitcoin trades in correlation to stocks, which means if they decline, so does cryptocurrency. Market analysts said that the macro environment has become quite difficult, as the dollar continues to rise.
A rising dollar has an impact on all risk assets and they would only go back up if the greenback records some declines.
This year has seen the crypto market take a beating, as almost $2 trillion was wiped off from its total market cap since it reached its peak last year in November.
As far as Bitcoin is concerned, it has dropped 60% from its record high of $68,990.90, which it had reached back in November.
A difficult environment for risk assets resulted in the sell-off and there were also issues specifically related to the crypto market, such as bankruptcies and collapsed projects across the industry.
Since June, Bitcoin has been trading between the range of $18,000 and $24,000. Market analysts said that the crypto tends to go back to previous lows to test them for support.
Unless Bitcoin falls below the $17,500 mark, then it is likely that the market would continue to consolidate between the $18,000 and $24,000 range.
During this other, Ether as well as a number of other altcoins, or alternative coins, were able to rise more than bitcoin.
Both Ethereum and Bitcoin had hit new lows in June, but the former managed to outpace the latter since then.
Ether is the native token of the Ethereum network, which is scheduled to make a big change this month that has been dubbed the merge.
This involves the transition of the network from a Proof-of-Work (PoW) consensus algorithm to a Proof-of-Stake (PoS) one, which proponents claim will bring more efficiency.
Analysts said that Ethereum had reached new highs against bitcoin because of the upcoming merge, which has resulted in more activity in the altcoin space.