Bitcoin’s recent weaknesses have traders concerned it could drop below $32,000

Cryptocurrencies have been weighed down by the overall risk aversion that has swept though global markets

Bitcoin is down more than 20 per cent so far in 2022. AP

Bitcoin slumped for the seventh time in eight days on Friday, raising concern that the slide risks pushing the largest cryptocurrency out of the range it has traded within for much of the year.

Cryptocurrencies have been weighed down by the overall risk aversion that has swept though global markets as central banks battle inflation while trying to temper the stimulus added during the Covid-19 pandemic. Bitcoin is down more than 20 per cent so far this year.

“If risk sentiment continues plummeting, the chicken bones on the technical charts suggest Bitcoin could be on its way to $28,000 and then $20,000,” Jeffrey Halley, a senior market analyst at Oanda Asia Pacific, said in an email. “Hold on for dear life.”

Bitcoin fell about 1 per cent to $36,077 as of 5pm Eastern time on Friday. It touched the lowest level since February and closed down around 6.3 per cent since last Friday.

The digital asset has been meandering between roughly $33,000 and the $48,000 it came into the year at. It last traded below $32,000 in July. Ether, Avalanche and Solana also declined this week.

About $475 million in long Bitcoin positions were liquidated over a 24-hour period, according to data from Coinglass. Bitcoin fell around 8 per cent on Thursday, the biggest one-day drop since January.

Bitcoin “is down by nearly 10 per cent, breaking its support price, and there are chances that it may break below the current level,” said Edul Patel, chief executive and co-founder of Mudrex, an algorithmic-based crypto investment platform. “Bitcoin's support now lies at $32,000.”

Bitcoin has been largely trading in tandem with tech stocks – both the coin and the tech-centric Nasdaq 100 hit all-time highs in November and have been on a volatile downward path since. The Nasdaq 100 fell for a fifth consecutive week.

The 90-day correlation coefficient of Bitcoin and the tech gauge now stands above 0.67, the highest such reading in Bloomberg data going back to 2010. A co-efficient of 1 means the assets are moving in lockstep, while minus-1 would show they’re moving in opposite directions.

David Duong, head of institutional research at Coinbase Global, has been arguing there are plenty of headwinds facing crypto – and other markets – this year, including more hawkish central-bank policies, as well as uncertainty over the path of global economies.

Updated: May 07, 2022, 1:00 PM