Bitcoin (BTC) dropped through a major support level Tuesday, falling below $19,700 amid a sell-off in broader markets that saw equity indexes decline and the euro approach parity with the U.S. dollar.
Price charts show bitcoin saw rejection at last week’s $21,800 level. It experienced some support at $20,500 over the weekend and dropped to the $19,700 mark in early Asian hours Tuesday. A brief bump up to almost $20,000 was followed a return to the lower level in the European morning.
Bitcoin could drop to as low as $18,700, a level it reached earlier this month, technical analysis shows. A recovery from current levels, on the other hand, could see bitcoin climbing as high as the $21,300 zone in coming weeks.
The declines came as Singapore state-owned Temasek Holdings, which manages more than $287 billion of assets, cautioned of more downturns across financial markets, citing the likelihood of a “recession in developed markets.”
Temasek said it forecasts a “mild recession” in the U.S. next year, adding that China faces “challenges” and the global economy “is in a fragile state.” “Rising inflation, surging commodity prices, and severe supply chain bottlenecks have uncovered further fault lines in the global marketplace,” it said in a statement.
The euro dropped to a 20-year low of $1.0002 against the dollar, approaching parity. The weakness arose amid concerns of an energy crisis stemming from Russia's invasion of Ukraine that would tip the region into a recession, while the U.S. dollar was buoyed by expectations of the Federal Reserve committing to faster rate hikes.
Equity markets also suffered. In Asia, the Hang Seng index fell 1.26% while Japan’s Nikkei 225 dropped 1.75%. The Stoxx Europe 600 index fell 0.60%, while Germany’s DAX lost 1%. U.S. futures on the Nasdaq 100 and S&P 500 fell 0.68%.
Some bitcoin investors see more reasons for a decline than a rebound.
“An additional reason has strengthened our view that the upside will be capped in the near-term: This is the news about Mt. Gox releasing approximately 140,000 BTC in August,” QCP Capital traders said in a Telegram broadcast on Tuesday.
“Our main takeaway is that there is a high chance of BTC supply flooding the market soon,” they wrote. “The possible impact would be additional selling pressure on BTC and perhaps the outperformance of ETH and [altcoins] against BTC.”
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