- Bitcoin price has been in a freefall in the past few months.
- The bankruptcy of FTX will likely lead to more contagion risks.
Bitcoin price plunged below $15,000 as contagion risks in the crypto market continued. The BTC/USD price crashed to a low of 15,501, its lowest level in more than two years. Similarly, the BTC/GBP and BTC/EUR pairs also plunged after FTX filed for bankruptcy protection.
FTX files for bankruptcy
The collapse of Alameda Research and FTX made headlines this week. On Friday, as was widely expected, FTX decided to file for bankruptcy as the company struggled to fill a $8 billion funding hole.
The collapse sent memories of the end of Lehman Brothers, which was one of the biggest banks in the world. In response to its collapse, other financial institutions in the US like Goldman Sachs, JP Morgan, and Citigroup moved close to bankruptcy. Such a situation is known as contagion.
The collapse of FTX is a major thing considering that it was the third-biggest crypto exchange in the world after Binance and Coinbase. As such, the impact of this crash is being felt around the world considering that cryptocurrencies have lost billions of value.
Read more on the safest crypto exchanges.
Bitcoin price attempts to recover have been disrupted by the FTX bankruptcy. It was rebounding as investors reacted to the latest American inflation data. According to the Bureau of Labor Statistics (BLS), consumer prices dropped from 8.3% in September to 7.7% in October. Core inflation, which excludes the volatile food and energy products declined as well.
As a result, Bitcoin and other cryptocurrency prices bounced back. On Thursday, the Dow Jones jumped by more than 1,200 points while the Nasdaq 100 index jumped by over 3%. The thinking among investors is that the Fed will now pause its aggressive rate hike regime in the coming months.
Still, the Fed has hinted that it will maintain high rates for a while until inflation drops to the 2.0% target level. Therefore, BTC is fighting a tightening phase of the market and rising contagion risks.
Will Bitcoin price recover?
The weekly chart shows that Bitcoin is in deep trouble. This week, the coin managed to move below the important support level at $17,529, which was the lowest point this year. It has also crashed below the important moving averages while the Stochastic Oscillator has moved below the oversold level.
Therefore, looking at the chart, the next important reference level to watch will be at $13,822, which was the highest point on July 19. This price is about 22% below the current level.
