Why is Bitcoin Performing the Way It Is?

The crypto market has suffered burns for weeks on end, and the value has continued to go lower. In 2022, we can safely say that crypto has had it bad, especially BTC.

What could be the reason for this increased decline and will it end anytime soon?

So far, the flagship crypto has lost over 30% of its value in the last two months and is still in red on the market indicators. Bitcoin is down up to 75%.

Scott Minerd, a Guggenheim executive predicted that BTC may drop to about $8k, which is an over 70% drop. He says that if BTC keeps breaking well below $30k, it will eventually touch $8k.

There are several factors we think have so far affected Bitcoin prices:

First of all, it is interesting that all of this is happening amidst high inflation rates in many countries – the world seems to be going through uncontrollable inflation rates. It is even more curious because BTC has always been believed to be a protective tool against inflation of fiat currencies due to its decentralized nature.

The world economy has no doubt had an effect on the crypto market as well. Previously, Bitcoin mirrored the American stock market performance, as the economy boomed and a lot of spending was happening. These days, the economy isn’t what it should be, inflation rates have hiked, and the central banks have tried to manage it by introducing interest rates. Investor interests are waning because of the economic concerns, which means stocks are falling, and of course, the crypto market is following the trend. This means then, that sometimes, inflation does affect crypto after all.

Jerome Powel, Federal Chief of the U.S admitted that the possibility of a looming recession had increased. The United States Central Bank earlier reduced balance sheets worth around an estimated $9 trillion and increased interest rates by as much as 75 basis points.

With these, the speculations remain that there will continue to be a huge crypto dump as liquidity will keep happening.

There is a massive forced BTC and Ethereum selling, as Arthur Hayes, former BitMEX CEO rightly points out, which he says may lead to more decline in the crypto market. He goes on to say that the rates will most likely continue to rise even as the FOMC keeps monitoring incoming data. With the monitoring, he says that the Fed won’t be on autopilot exclusively with the liquidation.

Currently, BTC is at $20.5k and the market seemed to recover after sellers left their positions, but so far, Canada’s Purpose BTC ETF has experienced a sale of 24,500 BTCs.

So far, 40% of BTC investors are underwater due to the decline.

Another reason for the decline could be due to Geopolitical tensions.

When will the current downtrend end? No one knows, but there may be opportunities to buy coins from people that are rejecting bids.

Hayes anticipates one weekend when sellers get panicked and flood the bid-less market, this will result in the capitulation of crypto.  So far, the Fear and Greed index is at 13/100, as reported by Coinglass.

Guggenheim says that he believes only two coins will end up surviving the decline, namely Ethereum and BTC. Some investors are positioned to jump in as they predict BTCs eventual rise. Do you think BTC’s price will increase anytime soon? Or do you think Guggenheim is right about the price reaching $8k?

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