As stocks plummet and inflation surges, cryptocurrencies appear to be following suit.
In the past six months, Bitcoin, the largest cryptocurrency by market capitalization, has lost about half of its value.
Currently, Bitcoin is selling at an average price of $29,700, and Glassnode has recorded an outflow of almost $1.3 billion, with a net discharge of nearly $700 million.
Ether, the second-largest cryptocurrency, has lost more than 55 percent of its value. This does not even begin to address the TerraUSD scandal and its repercussions.
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In the past week, crypto fund assets under management (AUM) reached their lowest level since July 2021.
This was a result of the current price drop in cryptocurrencies and equity markets, which has been partially driven by the U.S. Federal Reserve’s decision to begin reducing its balance sheet this month.
Bitcoin At An Inflection Point
A senior market expert at Bloomberg Intelligence has cautioned that Bitcoin is at a so-called “inflection point,” which indicates that the cryptocurrency is positioned on a curve where it may rise or fall.
A portion of the uncertainty leading investors to shun risky assets like cryptocurrencies is undoubtedly attributable to rising interest rates.
With rising interest rates, tech stocks and cryptocurrencies have been severely impacted.
According to Yash Patel, a general partner at Telstra Ventures that invests in crypto businesses, larger institutional players have expanded their trading activity in cryptocurrencies over the past several years.
As interest rates rise, borrowing money to undertake these transactions becomes less desirable.
Currently, cryptocurrency is tied to the markets, which many think is not good for investors in the near term.
BTC total market cap at $565.76 billion on the weekend chart | Source: TradingView.com
‘Very Poor’ Expectations For Crypto
Joseph Edwards, the head of financial strategy at the investment management company Solrise Finance, stated that he has “very poor” expectations for Bitcoin and cryptocurrencies in general.
“There’s not much fresh funding flowing into the markets, which is always a prerequisite for market expansion,” he said.
For her part, the vice chair of the Federal Reserve, Lael Brainard, notes that the market may finally consolidate and decline, which might result in a price retreat of $22,000 to $24,000 for Bitcoin.
Bear Market Here For A While
Brianard noted that the Bitcoin price may loiter near the price support zone before dropping, 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 clear the people who were there for the wrong reasons,” he said.
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Featured image from Cointribune, chart from TradingView.com
Source: https://www.newsbtc.com/news/bitcoin/bitcoin-seen-dropping-to-22k/