Bitcoin Prices Are Plunging to Yearly Lows. Where Do Cryptos Stop Falling?

“The retail trader is starting to panic again,” said Edward Moya, an analyst at broker Oanda. “Bitcoin is breaking below the key technical levels.” The analyst believes that selling pressure makes Bitcoin vulnerable to a fall toward $17,500.

Other analysts have proffered even more pessimistic price targets over the past week as Bitcoin slipped below the key $20,000 level and struggled to pop back above it. 

Bendik Norheim Schei, the head of research at crypto firm Arcane, has said that it’s “dangerous” to estimate where Bitcoin would go next, but the group is preparing for the next major support level for Bitcoin at $16,000 on a weekly scale.

Naeem Aslam, an analyst at broker AvaTrade, has said that even the bullish traders that have helped prop up prices are unlikely to be able to stop a slide below yearly lows, with $15,000 being a key psychological support level.

What happens next is anyone’s guess. A complex suite of factors—largely beyond crypto—are pressuring Bitcoin prices.

While cryptos should, in theory, trade independently of mainstream finance, they have shown themselves to be largely correlated to other risk-sensitive assets, like stocks. Digital assets have been weaker of late amid the

Dow Jones Industrial Average
and

S&P 500
notching three straight weeks of losses. 

Investor sentiment for risky bets has faded amid inflationary pressures, worries around recession, and the likelihood that central banks like the Federal Reserve will continue tightening financial conditions, dampening liquidity. This has manifested, in part, with a surge in the dollar, with the

U.S. Dollar Index
—which measures the greenback against a basket of six peers—hitting a new 20-year high on Wednesday.

“With weakness in almost all other currency pairs, the pressure remains on equities, bonds and Bitcoin markets alike,” analysts at crypto market intelligence group Glassnode said in a note Monday. “For Bitcoin specifically, the underlying market very much resembles the macro scene, with a volatile and uncertain short-term, whilst the longer-term outlook is more consistent, and characterized by well developed trends.”

It was a sea of red in crypto beyond Bitcoin.

Ether,
the second largest crypto—which has enjoyed a major boost of late from growing anticipation around a key upgrade called The Merge—tumbled 8% to nearly $1,500. Smaller cryptos, or altcoins, were unspared, as

Cardano
lost 7% and

Solana
shed 5%. Memecoins—initially intended as internet jokes—also dropped, with

Dogecoin
down 6% and

Shiba Inu
4% lower.

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