Blockchains appear to be following in the footsteps of stocks that are falling and high inflation.
Bitcoin, by market capitalization the most valuable cryptocurrency, lost approximately half its value over the past six month.
Bitcoin currently sells at an average of $29,000. Glassnode recorded an outflow in excess of $1.3 billion with a net loss of approximately $700 million.
Ether has seen its second-largest cryptocurrency lose more than 55% of its value. The TerraUSD scandal, and all its consequences, is not addressed in this way.
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The crypto fund assets under management, (AUM), reached the lowest levels since July 2021 in the last week.
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’s 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.
Rising interest rates are undoubtedly responsible for some of the investor uncertainty that has led to a reduction in risky investments like cryptocurrency.
Tech stocks and cryptocurrency have suffered severe losses due to rising interest rates.
According to Yash Paltel, a general partnership at Telstra Ventures, which invests in cryptocurrency businesses, large institutional investors have increased their crypto trading activities over the last several years.
Borrowing money for these types of transactions is less attractive as interest rates increase.
At the moment, cryptocurrency is linked to the market, which is a problem for many investors.
Source: TradingView.com| 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 observed that Bitcoin prices may be hovering near the support zone, suggesting that the trend downward may persist.
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 taken from Cointribune. Chart by TradingView.com