Bitcoin slides back under $20K as investors flee to U.S. dollar haven

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Bitcoin (BTC-USD) is dipping back under its key technical level in early Tuesday morning trading amid a broad flight to safety as fears of a recession deepen and financial conditions keep deteriorating.

The token is dipping 3.3% back to below $19.8K as of shortly before 9:00 a.m. ET, trading as low as $19.5K earlier in the session. Bitcoin (BTC-USD) has been range bound since mid-June. Similarly, ethereum (ETH-USD) is falling 6.8% to $1.07K over the past 24 hours.

Overall, the global crypto market cap is off 3.5% to $880.80B, according to data from CoinMarketCap.

“It is indeed surprising that Bitcoin has remained range bound for such a long period, considering the geopolitical and macro-economic factors at large,” Nick Healre, head of Corporate Advisory at U.K.-based digital asset broker GlobalBlock, wrote in a note. “In China, we have heard reports of bank runs due to depositor’s accounts being frozen, a default of Sri Lanka, not to mention the ongoing war in Ukraine and escalation of Covid measures in China which will continue to impact the supply chain.”

The slump in cryptos comes as financial markets fret over recession risks and a soaring dollar, which is at parity with the euro (FXE) for the first time in 20 years. The trade-weighted U.S. dollar index is rising 0.15% against a basket of major currencies to 108.18, up a whopping 17.2% Y/Y jump in a move that spells risks of a global deflation-based recession.

“We remain very bullish on the USD $DXY,” Piper Sandler Chief Investment Strategist Michael Kanto wrote in a Twitter post on Monday. “The downside risk will come when the Fed stops hiking, albeit for a short period. The USD will hit new highs again thereafter as the global economic recession deeps.”

Investors will be eyeing consumer price inflation data on Wednesday, as the consensus for June is +8.8% over the prior year, up from +8.6% Y/Y in May. In the past year, of surging inflation bitcoin (BTC-USD), more times than not, either consolidated or fell immediately after a CPI reading, implying that the world’s largest digital token by market cap does not act as an inflation hedge.

Crypto-related stocks are also trading in the red as stock futures point to a weaker open. Coinbase (NASDAQ:COIN) -1.5%, MicroStrategy (NASDAQ:MSTR) -1.8%, Marathon Digital (MARA) -1.3%, Riot Blockchain (RIOT) -1.6%, Silvergate Capital (SI) -0.5% and Bit Digital (BTBT) -1.3% are all extending Monday’s losses in premarket trading.

Earlier this week, (July 11) macro researcher Paul Krate said crypto and bitcoin are “BS” and rife with fraud, and most coins will “go under.”