Cryptocurrency losses deepened, with popular Defi tokens such as Solana and Avalanche falling more than sector bellwether Bitcoin, as contagion concern mounts in the wake of the collapse of hedge fund Three Arrows Capital.

Bitcoin dipped below $20,000 for the first time in almost a week, as the token’s lack of sustained upward momentum caused some technical analysts to raise the prospect of further declines.

The largest cryptocurrency dropped as much as 2% before recovering slightly to trade at $20,068 at 9:09 a.m. in New York. The MVIS CryptoCompare Digital Assets 100 index, which measures 100 of the top tokens, fell as much as 4.1%. Solana slipped as much as 6.2% and Avalanche fell by as much as 7.2%.

“Most short-term technicals point to an above-average chance of a final ‘washout’-style decline before this bottoms,” said Mark Newton, technical strategist at Fundstrat, in a note Tuesday. Bitcoin has room to drop as low as $12,500 to $13,000, “which I expect should be an excellent place for intermediate-term buyers to add to longs,” he wrote.

Bitcoin has dropped by more than half since the end of 2021
Bitcoin’s relatively steady trading since crashing to a low of $17,560 on June 18 had fueled optimism that the battered crypto market was setting the stage for a rebound. Yet the sector remains under pressure from central banks’ efforts to drain liquidity, as well as a series of high-profile crypto blowups that have dented investor confidence.      

More stable crypto prices recently have probably sparked some relief “given the stream of negative headlines over the last couple of months,” said Craig Erlam, senior market analyst at Oanda. “I fear more may follow in the weeks ahead and I wonder whether the community does too, given its inability to get any traction above $20,000.”

This article was provided by Bloomberg News.