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The US central Reserve’s Chairman Jerome Powell announced last December that the monthly rate at which asset purchases would be cut would be doubled, contributing to the rapid decline in Bitcoin’s value. The Federal Reserve System Committee for Open Markets, Why is Bitcoin Dropping.
The Federal Reserve’s suggested steps to curb inflation had a detrimental influence on Bitcoin, as the value of apparently risky assets like Bitcoin decreased after the favorable tax adjustments.
Additionally, if Bitcoin becomes more widely adopted and a more trusted option, its value will decline. At this time, the price goes up and down the same way as stocks.
Why is Bitcoin Dropping; As is often the case with previously experienced falls, there is never just one reason. According to Blooomberg, one of the main ones is that investors are selling in large numbers, as positions worth something like $475 million have been liquidated in hours. The climate of uncertainty does not come from cryptocurrencies as such but from a mood of distrust in the face of the increase in interest rates in the United States and inflationary effects in that and many other countries.
These combined effects have caused large sales of shares, which is generating constant falls in the stock market and specifically in the technological index, the Nasdaq. It is well known by experts that. Despite the promise of decentralization and cryptocurrencies operating independently of traditional banking. The truth is that cryptos have seen their value closely linked to that of the stock market. At least in the last 24 months.
Key facts:
The bitcoin (BTC) price fell to $37,750 overnight after hitting $40,700. At the moment, it is trading at $38,800, which shows a slight increase from the low touch today.
According to analyst Willy Woo, the bitcoin price currently only 10% influence by spot demand. Instant, 90% of short-term costs determine by futures traders, the dominant cryptocurrency derivative according to Glassnode, as they oscillate risk-on and risk-off. A financial concept that he calls assets that represent high versus low risk.
Traders are operating against a background of considerable economic and political uncertainty. This is due to global fears of a deep recession, rising inflation, a supply chain breakdown fueled by China’s moves, and the constant threat of Russia’s war in Ukraine.
This leads traders to avoid risky investments and look for safe assets to protect their money. This frames by the rise in the price of commodities, such as gold and oil, the US dollar, and the downward behavior of stocks and cryptocurrencies.
As for the rise in the US dollar, Willy Woo said: “I read this as a harbinger of growing fears of a global market crash as investors run to the safety of cash.” Also, in this context, he sees the bitcoin form as an asset to store value in the face of a crisis that could unleash.
Bitcoin, the most well-known cryptocurrency on the market, hit an all-time high six months ago but has subsequently fallen by roughly 50% as monetary policies tighten to battle excessive inflation.
This cryptocurrency has been on a downward trend from the beginning of the year, with a fall of 25.4 percent (it concluded 2021 at $46,333.65) in a few months that have condition by geopolitical tensions resulting from Russia’s invasion of Ukraine and excessive inflation.
As a result, central banks have altered their monetary policies, becoming more aggressive in the case of the US Federal Reserve (Fed), which has already made two interest rate hikes, the most recent of which was last Thursday with a half-point increase, even though it has yet to set a date for rate hikes, has toughened its rhetoric and stated that it will begin to withdraw the stimuli enabled by the pandemic.
the head of Coinmotion for Spain believes that the Fed’s news of a rate hike sent markets into a frenzy and “probably” caused cryptocurrencies to lose value.
The Fed is expected to continue tightening its monetary policies this year so, according to the markets will evolve depending on whether the measures adopted by these organizations are those anticipated by the governments, which “in part could also influence the evolution of the price, not only of bitcoin but of other cryptocurrencies.”
For his part, Diego Morín has warned that in 2017, with the previous cycle of increasing the Fed’s rates, the first “sudden” upward movement of this digital currency began and, therefore, he has assured that he does not rule out that in the next few months “there will be some bullish rally again in the case of bitcoin.”
According to Bernos, up to three factors can found behind the recent drop in bitcoin. The first is the correlation between the traditional market and the falls that these suffer. In other words, it has affect by extreme volatility in the face of economic and geopolitical uncertainty.
“International markets have fallen, as have shares, significant companies. So, the crypto world has a certain relationship with the more traditional markets because institutional investments come into this world”, he expressed.
Second, Bernos recalls that there has not been any factor that drives the demand for cryptocurrencies, whether news or an event that expands the market. For example, in February 2021, Elon Musk, the owner of Tesla, invested $1.5 billion in Bitcoin and began accepting it as a payment method. That day, bitcoin rose to $44,000.
“This generated a robust expansion in demand, which caused the price to increase due to a limited supply. However, in these first months of 2022, there has been nothing of this nature,” said Bernos.
As a third factor, Bernos recalled that the cryptocurrency market is volatile. And that “it is normal for there to be these fluctuations.”
“Last year, there was an extreme downturn between May and June. Bitcoin was very close to $30,000 as it is right now, and in October, there was a gradual recovery. Unfortunately, this fall will continue in the short term, and it is natural in cryptocurrencies.
“The sheer strength of spot BTC buying in the face of risky macroeconomic sentiments suggests that investors already view it as a haven, even if the price does not yet reflect this,” the analyst stated. This is because the value of the cryptocurrency. Has managed to remain relatively stable during the year. With falls that have not been so harsh, despite the fear of the market.
The same concluded a study by Blockware Intelligence reported in CriptoNoticias. Their report warns that some investors view bitcoin as a superior savings technology. And in the current macroeconomic environment of excessive inflation creating uncertainty and turmoil throughout the market.
Along these lines, Willy Woo highlighted that the demand. For cryptocurrency is approaching multi-year highs while prices fall sideways, becoming oversold. Therefore, he believes that the cost of BTC reached a specific bottom region and points to a rally.
Bitcoin reached the demand level in 2020 when the excellent buying force led to an exponential price increase. Source: Willy Woo.
However, he considers that it will trade lower if the stock shares fall due to the correlation they have maintained. A prediction in tune with what say by the trader Eduardo Gavotte. Who views the market as risk-off, away from high-risk assets, which generate sales of the cryptocurrency and price drop.
With no risk appetite, there would be no new demand for bitcoin. And in many cases, there would be selling pressures. Above all, in cases where it invests with leverage via futures contracts.
The market is difficult and uncertain to read at the moment, but in the long term. It seems more straightforward, Willy Woo said. “We are seeing how a supply shock structure develops, with firm purchases that have not been reflected in the price. This usually ends in a lot of upward pressure on prices,” he said.
https://www.cnbc.com/2022/06/13/bitcoin-btc-falls-as-market-focuses-on-celsius-issue-fed-rate-hike.html
The price of Bitcoin (BTC) has been dropping sharply, thanks to major turbulence in cryptocurrency markets.
As of writing, BTC has fallen below $23,000, down from approximately $28,000 on Sunday morning. This is a major break lower from the $28,000 to $32,000 range the benchmark crypto had been seeing since the stablecoin meltdown of early May.
The current bout of crypto volatility began with the worrying May U.S. consumer price index (CPI) report on Friday, which delivered another inflation shock to the global market.
Hotter inflation has raised expectations for the possibility of a bigger interest rate hike from the Federal Reserve, which begins a two-day policy meeting on June 14.
The elevated volatility over the weekend drove a popular crypto lending company called Celsius (CEL) to pause customer withdrawals, and that move sparked fears that contagion was ripping through markets.
he recalled that after six months of solid accumulation of BTC until the beginning of 2021. Its price went from USD 10,000 to USD 60,000. According to his prediction. A situation that suggests it could happen again if the context of 2022 motivates the high strength of demand.
The immediate trigger for the crypto crash appears to be a massive sell-off by investors amid heightened inflation fears and pausing of withdrawal by crypto lending service Celsius. Investors are also continuing to stay away from riskier assets, which is reflected in the stock markets as well.
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