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Bitcoin falls below $24,000 as experts see ‘Mordor’ ahead, the land of evil from Lord of the Rings. Here’s what they’re looking out for

Photo illustration by Fortune; original photos by Getty Images

Bitcoin dropped below $24,000 on Monday as the wider cryptocurrency market continues to fall.

The largest cryptocurrency by market value is trading at about $23,489, down 22% in the last seven days, according to CoinGecko. Ether, the second largest, is also down to about $1,235, dropping 32% in the same time frame.

The $20,000 mark is scary territory. As Meltem Demirors, chief strategy officer at digital asset investment firm CoinShares, tweeted in May, “below $20,000 is Mordor,” referring to the mythical land of evil in J.R.R. Tolkien’s fantasy epic The Lord of the Rings.

The downturn seems mainly tied to macroeconomic developments. Things went south after the Bureau of Labor Statistics released monthly inflation data from the consumer price index (CPI) on Friday morning, showing an 8.6% year-over-year increase in May. That was higher than Wall Street consensus estimates and marked a new 40-year-plus peak.

In addition, fear struck the market after the Terra ecosystem collapse, with failed algorithmic stablecoin TerraUSD (UST) and cryptocurrency Luna (LUNC) becoming nearly worthless last month. On Sunday, further chaos ensued after cryptocurrency lending platform Celsius paused all withdrawals, swaps, and transfers between accounts.

Experts in the space see one “key” to watch out for when assessing what’s next for the cryptocurrency market, and whether a bounce back is in the cards soon.

“It’s a giant stress test”

Cryptocurrency “still remains very highly correlated to macro conditions, which have been extremely negative to start the week,” Corey Miller, growth lead at Dydx, told Fortune. “In addition, the potential implosion of Celsius is adding more fuel to the crypto carnage here, as some data on chain data is suggesting that the firm is becoming a forced seller of a portion of their collateral here.”

Similarly, Bitwise Asset Management CIO Matt Hougan told Fortune, “We are seeing the aftereffects of the Fed-induced macro shock ripple through the crypto markets,” he said. “It’s a giant stress test on the system. By and large, most things are passing the test, but not everything.”

This will continue “until we hit bedrock, and the excesses in the market are cleansed from the system,” Hougan said. “This process of clearing out the excesses of the past bull market can be painful and can continue longer than many people expect.”

But, long term, “this will pass,” he said.

Though the future may seem grim, Hougan is still bullish on the future of the cryptocurrency market. To him, the real question is, “Are there more shoes to drop?”

“If you think the answer is no, this is likely an incredible buying opportunity: Markets often stage sharp recoveries at the end of volatility shocks,” Hougan said. “The challenge is we don’t yet know with clarity what the downstream effects of Celsius unwinding will be, or if there are other entities facing challenges as well. The key is to watch to see if the liquidity cascade stops here or if there are more steps to go.”

Nonetheless, the demise of UST and LUNC, combined with what’s happening with Celsius, is a “setback for crypto,” Michael Safai, managing partner at crypto trading firm Dexterity Capital, told Fortune.

“Many traders have also been aware that any bad news could knock down Bitcoin toward $20,000,” Safai said. “The prevailing attitude is more one of frustration than of shock or fear.”

As for the Mordor comparison, the protagonist of Tolkien’s series, Frodo, eventually comes back from his trip to the land of evil, but not without making a huge sacrifice. He wasn’t quite the same as when he went there.

This story was originally featured on Fortune.com