Bitcoin Drops To $22K As Bear Market May Hold For A While
As stocks plummet and inflation rises, cryptocurrencies seem to be following suit.
Over the past six months, Bitcoin, the largest cryptocurrency by market capitalization, has lost about half of its value.
Bitcoin currently sells at an average price of $29,700, and Glassnode has recorded an outflow of nearly $1.3 billion, with a net redemption of nearly $700 million.
Ether, the second largest cryptocurrency, has lost more than 55 percent of its value. This doesn’t even start with the TerraUSD scandal and its fallout.
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In the past week, assets under management of crypto funds (AUM) hit its lowest level since July 2021.
This was the result of the current price drop in cryptocurrencies and stock markets, which has been partly caused by the decision by the US Federal Reserve to start deleveraging its balance sheet this month.
Bitcoin at an inflection point
A senior market expert at Bloomberg Intelligence has warned that Bitcoin is at a so-called “inflection point”, indicating that the cryptocurrency is on a curve where it can rise or fall.
Part of the uncertainty that causes investors to avoid risky assets like cryptocurrencies is undoubtedly due to rising interest rates.
With interest rates rising, technology stocks and cryptocurrencies have been hit hard.
According to Yash Patel, a general partner at Telstra Ventures that invests in crypto companies, larger institutional players have expanded their trading activities in cryptocurrencies in recent years.
As interest rates rise, it becomes less desirable to borrow money to carry out these trades.
Currently, cryptocurrency is tied to the markets, which many believe is not good for investors in the short term.
BTC total market cap at $565.76 billion on the weekend chart | Source: TradingView.com
‘Very bad’ expectations for crypto
Joseph Edwards, head of financial strategy at investment management firm Solrise Finance, stated that he has “very poor” expectations of Bitcoin and cryptocurrencies in general.
“Not a lot of new funding is flowing into the markets, which is always a prerequisite for market expansion,” he said.
For its part, Federal Reserve Vice-Chairman Lael Brainard notes that the market may eventually consolidate and fall, which could result in a price drop from $22,000 to $24,000 for Bitcoin.
Bear Market here for a while
Brianard noted that Bitcoin price may hover near the price support zone before falling, indicating that the downward trend may continue.
Meanwhile, blockchain and cryptocurrency industry insiders told CNBC that the latest drop in the digital coin market could help eliminate “bad actors” from the market.
“We are experiencing a bear market,” Bertrand Perez, CEO of the Web3 Foundation, told CNBC at the World Economic Forum in Davos, Switzerland.
“I think that’s a good thing because it will purify the people who were there for the wrong reasons,” he said.
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Featured image of Cointribune, chart of TradingView.com