Fed Rate Hike Unclear, Bitcoin Falls Below $21,000

The largest cryptocurrency, bitcoin, tumbled more than 9 percent to below $21,000, hitting a new low in late July. Bitcoin also posted its biggest one-day drop since June.

Bitcoin fell with U.S. stock futures falling as selling emerged during European trading the next day.

At the time of writing, the benchmark cryptocurrency was trading at $21,217, according to CoinMarketCap data,

About $220 million in crypto positions were liquidated within an hour on Friday, with bitcoin accounting for about half of that, according to Coinglass data.

In the past 24 hours, nearly 170,000 positions were liquidated, and the liquidation amount was close to $600 million.

Analysts believe the sell-off was prompted by the close correlation between U.S. stocks and cryptocurrencies in recent months and disagreements within the Federal Reserve over the pace of interest rate hikes.

Germany's producer price index for industrial goods (PPI) rose to a record 37.2% in July, compared to expectations of 32%, a report that spurred central banks to raise interest rates to curb inflation, sparking selling pressure on cryptocurrencies.

St. Louis Federal Reserve Bank President James Bullard backed a 3-yard rate hike at the Fed's regular September meeting. Esther George, president of the Kansas Federal Reserve Bank, said there are still good reasons to keep raising rates.

Craig Erlam, a senior market analyst at Oanda, said the trigger for the sell-off in bitcoin is unclear, but the move is well-founded, judging by the fact that it has barely recovered to regain lost ground. He believes that the next support is at $20,000, and "the crypto winter is not over yet."

The Bitcoin "Fear and Greed Index" is now in the fear territory at 29.

 According to cryptocurrency analyst Il Capo, “BTC levels: Main resistances: 22500 and 23500. Every short squeeze to these levels is a good sell opportunity. Main support: $19k. This is the ultimate bearish confirmation for new lows. Main target: same as always, $16k. Very likely for the coming weeks.,” He wrote on his Twitter.

Bitcoin’s price has rebounded since hitting a low of $17,599 on June 18, but it is still down 54 percent this year.

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