The Debacle In Crypto Markets

Over the previous 24 hours, the cryptocurrency market has lost over $130 billion in value, as major digital coins have continued their multi-day sell-off. According to Coin Metrics, Bitcoin was recently down roughly 4% at $33,755.57, while Ether was down 7% at $2,239.08. They had fallen to their lowest levels since July earlier in the morning. They’re also around half-way down from their respective all-time highs. Cryptocurrencies are going in lockstep with stocks, which have been sliding since the beginning of the year because just had their worst week after March 2020. As the US Federal Reserve prepares to tighten monetary policy, investors have been dumping risk assets such as technology companies.

“It’s probable that macroeconomic worries, such as the Federal Reserve’s reaction to inflation rates, have permitted greater de-risking activity in general,” said Juthica Chou, Kraken’s head of OTC options trading. “As players attempt to reduce risk, the current price drop, along with high volatility, may prompt more selling.” The impact of more regulation on the bitcoin market is also being considered by investors. Last week, Russia’s central bank recommended a ban on cryptocurrency use and mining.

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According to Vijay Ayyar, Luno’s vice president of business development and international expansion, bitcoin is expected to test the $30,000-$32,000 level given current market mood. He believes that if the cryptocurrency stays over $30,000 for a week, a base will develop at those values before the market surges higher. Considering the paucity of confidence across the board, it may take some time for the marketplace to turn positive, he noted. Several other analysts have predicted that the Bitcoin would challenge $30,000 as the next level of support. However, 22V Research analyst John Roque believes bitcoin might fall even worse. He, too, has set a target of $30,000, but pointed out that the sets out general selloff for bitcoin is down 78 percent. Bitcoin is presently trading at a 50% discount to its all-time high.

Inflation is also a source of concern for investors. Bitcoin supporters have long claimed that the digital coin offers a safe investment, but many newer investors are sceptical. With institutional interest in bitcoin surging last year, there are many more brief investors in the cryptocurrency world than ever before, pricing bitcoin like a technology stock. A more aggressive Federal Reserve, according to economists, might stifle the cryptocurrency market’s growth. “Our most immediate concern, looking ahead, is how equities markets respond to this week’s Fed meeting, due to having just had their worst week since Covid’s international launch,” said Leah Wald, CEO of digital asset investment manager Valkyrie Funds.

“Because digital assets have become progressively correlated to equity markets as more companies continue adding bitcoin to their balance sheets, a convergence in stocks will indeed lead to a risk-on surroundings where market participants are more willing to take on significant risk assets such as bitcoin,” she added, “a risk-on atmosphere where traders are more prepared to take on extra risk assets such as bitcoin.” For the time being, bitcoin is expected to be volatile, as traders try to figure out where investor confidence stands following this week’s Fed meeting.”

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