New 'cryptocrash': Bitcoin´s price breaks the important level of $20,000 and these are the reasons why

Bitcoin´s and cryptocurrencies´ prices were on a roller coaster ride over the weekend, with the digital tokens' sharp swings that saw their total capitalization lose $800 billion for the first time since the end of 2020. The two major currencies broke very important support levels, only to recover them and embark on a short-term consolidation of recent moves, while experts believe that this week could see a rally in the crypto space.

On Saturday, Bitcoin fell 15% as support at $20,000 was broken, and ended the day down 7.50% to $18,955, despite touching a low of $17,900. On Sunday it rallied 8.40% to $20,550.00, to fall 3.50% this morning after another 'Solend' lab, which allows you to lend or borrow on Solana tokens, was granted emergency powers of attorney to take over a (very) large account to manage its exposure. "The more the fan overflows into the DeFi space, the less decentralized it seems to become as reality hits," commented Jeffrey Halley, an analyst at Oanda. Bitcoin has regained the $20,000 level and is settling there.

The expert pointed out that the price action on Saturday was triggered by a forced mass exit as chain stop-loss orders were triggered following the failure of the important $20,000 price level. "Traders and investors believe that the current crypto-winter is going to last for some time. This is because there is still a lot of pessimism, and until and unless we see the domino effect come to an end from Terra Luna, which has brought Celsius, another yield-producing project, to the brink of bankrupcy, we are unlikely to see any light at the end of this tunnel," noted Naeem Aslam, head of analytics at AvaTrade.

Bitcoin has already lost more than 70% of its value since peaking in November 2021 at nearly $69,000, dragged down by a crisis of confidence in the ecosystem, sparked by the collapse of Terra, the Celsius crisis and other vendors and companies. Cryptocurrency hedge fund Three Arrows Capital suffered heavy losses and said it was considering asset sales or a bailout, while another lender, Babel Finance, followed in Celsius' footsteps this past week.

As for Ethereum, another widely followed cryptocurrency that has been falling in recent weeks, it performed similarly on Saturday. Ethereum-backed Ether is down 74% from its all-time milestone. Ether topped $1,000 and fell nearly 19% to $891, the lowest since January 2021. Both cryptocurrency market indicators are down more than 70% from all-time highs set in early November.

WHAT TO EXPECT NOW

Experts are not ruling out a cryptocurrency rally in the short term, but speaking from a technical perspective it is very clear that Bitcoin and Ethereum prices are extremely oversold according to the Relative Strength Index. Any reading near the 30 mark or below 30 confirms that the current pessimism in the market has pushed prices too far, and a bounce is very likely. However, as Bitcoin´s price has violated the current support level of $20,000, "it is likely that we could continue to see the price moving down, and there may be another wave of selling, which could push the price towards the $15,000 or even $13,000 price level," commented Aslam.

This means that Bitcoin at that point will have retreated more than 85% from its all-time high. This is not the first time there has been a correction of more than 80% before as well, and this is nothing to worry about because we usually see extreme pessimism disappear when Bitcoin drops more than 80% and prices rise again.

"HODlers know for a fact that the current selloff is nothing to worry about. That's because they've been through many different collapses in the cryptocurrency industry, and every Bitcoin bear market has ended with Bitcoin claiming a new all-time high. And it is very likely that this time will be no different either," the expert pointed out.