After struggling to hold $20,000 on Wednesday, Bitcoin's buyer support has collapsed. The price of Bitcoin fell more than 5% to around $18,930 on Thursday.
The decline in the price of Bitcoin has been the largest since December 2018. It's also the worst month for the cryptocurrency since December 2018.
Like Bitcoin, the sell-off in cryptocurrencies continued on Thursday. Some notable cryptocurrencies that saw losses include the BNB token from Binance, Solana, Cardano's ADA, and Chainlink.
Ethereum, the second-largest digital currency by market cap, has been down 6.6% over the past 24 hours. It's also down more than 47% in June. The price of Ether has dropped by over 75% since its November all-time high of $4,878.26.
The value of the cryptocurrency market fell by 3.9% to $898 billion. Since November 2018, when the market hit a record high of over $3 trillion, the cryptocurrency industry has lost around $2 trillion.
Why Bitcoin fails to hold $20,000
The Federal Reserve's aggressive monetary policy is hurting the cryptocurrency market. It's raising fears that the country could be in recession. The central bank wants to prevent inflation from rising at its highest level in over 40 years.
In his testimony before the European Central Bank's governing council on June 29, Jerome Powell, the chairman of the Federal Reserve, acknowledged the risks that the central bank might go too far. He noted that the biggest mistake the Fed could make is not restoring price stability.
"Is there a risk we would go too far? Certainly, there's a risk," Powell said. "The bigger mistake to make – let's put it that way – would be to fail to restore price stability."
Economists and experts warned that the Fed's aggressive monetary policy could push the U.S. into a recession. They noted that investors are expecting higher interest rates and a slower economy. Despite this, they're not expecting inflation to remain high.
Aside from macroeconomic concerns, the market is also affected by various scandals. One of these is the liquidation of 3AC, a hedge fund that lost money on the collapse of Luna and its sister asset, TerraUSD. According to TheStreet, the fund paid hundreds of millions of dollars for its investments in cryptocurrencies such as Luna. This led to it missing a margin call with BlockFi.
SEC rejects ETF proposals
The decline in the price of Bitcoin and other cryptocurrencies was triggered by the rejection letters sent by the SEC to the proposed exchange-traded funds (ETFs) of Bitwise and Grayscale.
According to Michael Sonnenshein, the CEO of Grayscale, the next few months will be very important for the cryptocurrency industry.
As noted by Yahoo Finance, the proposed exchange-traded fund would allow GBTC investors to hold Bitcoin. It would also rely on the participation of authorized participants to continuously redeem and create new shares.
On Monday, Grayscale revealed that it had secured the support of two Wall Street firms to become its authorized participants. Virtu Finance and Jane Street firms would continue to serve as the fund's authorized participants once the SEC approves it.
The SEC's filing on Wednesday noted that Bitcoin is subject to manipulation through unregulated platforms. It also noted that the approval of the proposed exchange-traded fund could encourage more manipulative activities.
At midday Thursday, GBTC had been trading at around $12.25, which is around a 30% discount to the value of the trust's Bitcoin holdings. With the support of Wall Street firms, Grayscale was able to close the gap between the market price and its net asset value.