Bitcoin (BTC) posted seven straight weeks of losses for the first time in its history amid a downturn in the broader markets, tighter crypto regulations, waning retail interest and systemic risks in the crypto space, data show.
Bitcoin approached $47,000 in mid-March in a run that lasted a few weeks after falling to $37,000 from November highs of nearly $69,000. It has fallen every week since and could drop as low as $20,000 if current market conditions persist.
Bitcoin, the world's largest cryptocurrency by market capitalization, has long been positioned as an inflation hedge, or an investment designed to protect against the declining purchasing power of currencies or other assets.
However, this has not been successful so far, as bitcoin is highly correlated with global markets and has traded similarly to a risky tech stock in recent months. Some analysts believe investors are selling bitcoin on the rise.
"In our view, the trend to sell cryptocurrencies on the upside remains. The gloomy outlook for U.S. monetary policy, where there is still no light at the end of the tunnel with interest rate hikes, is contributing to the downtrend," FxPro market analyst Alex Kuptsikevich shared in an email.
"We do not expect the bears to loosen their grip in the coming weeks. In our opinion, a change in sentiment may not occur until the 2018 highs in the $19,600 area are approached," Kuptsikevich added.
Bitcoin fell as low as $24,000 last week when the stablecoin Tether (USDT) briefly lost its peg to the U.S. dollar. Investor sentiment was already soured at that point by the implosion of terra's LUNA and its stablecoin terraUSD (UST).
Inflation fears hurt bitcoin prices.
Inflation fears have contributed to the decline in bitcoin prices in recent weeks. Earlier this year, the U.S. Federal Reserve raised interest rates by the largest amount since 2000 to tighten monetary policy after the $2 trillion stimulus spending of recent years.
In April, Goldman Sachs analysts said in a note that the Federal Reserve's aggressive measures to control inflation could lead to a recession. The investment bank estimated the likelihood of an economic contraction - a phase of the business cycle in which the economy as a whole contracts - at about 35% over the next two years.
Lloyd Blankfein, Goldman's senior chairman, reiterated that assessment over the weekend, saying the U.S. economy is at "very, very high risk." Such an environment could lead to a downturn in U.S. equities, which could spill over into bitcoin and lead to further selling in the coming weeks if the current correlation continues.
The risks of a sell-off may already be emerging. Last week, the $18.3 billion Grayscale Bitcoin Trust (GBTC), the world's largest Bitcoin (BTC) fund, fell to an all-time low with a market discount of 30.79%, according to reports. The discount could be seen as a bearish indicator, as it could point to waning trader interest in Bitcoin.
GBTC is currently one of the only ways for stock traders in the U.S. to participate in Bitcoin's price movements without having to buy the actual cryptocurrency. (Grayscale's parent company, Digital Currency Group, also owns CoinDesk, which is run as an independent subsidiary.)
CoinGecko's data shows that Bitcoin is trading below the key $30,000 support level at the time of writing.