Very volatile? Bitcoin Returned To Low Price Of $ 40,000 – Losing 40% Of Its Value In Two Months
In the latest example of continued cryptocurrency volatility, the major digital currencies Bitcoin and Ethereum have seen their prices drop significantly since the start of the year, following remarks from the US Federal Reserve that it could raise rates. of interest.
Bitcoin in particular, the world’s most popular cryptocurrency, is currently in its worst crisis in four years, having lost almost 40% of its market value in just two months.
The popular coin saw its death spiral drop to $ 39,558 on Monday, falling below a crucial resistance marker of $ 40,000 for the first time since September 2021.
Bitcoin saw its market price drop to $ 39,558 on Monday amid the recent crypto crash, falling below a crucial $ 40,000 marker for the first time since September 2021
Ethereum – the second largest digital coin – fell 2.76% to $ 3,020.16 after briefly falling below the key $ 3,000 level, first seen in May 2021
It comes close to what market analysts commonly refer to as the “death cross,” a bearish indicator that occurs when the 50-day moving average falls below the 200-day moving average, and could mean bitcoin enters a bear market.
That said, Ethereum – the second largest digital coin – followed suit, falling 2.76% to $ 3,020.16 after briefly falling below its key $ 3,000 level, first seen in May 2021.
A tumultuous year for the coin saw it drop below $ 2,000, before hitting an all-time high, near $ 4,900 in November. This level of volatility has long been a blessing and a curse for crypto enthusiasts looking to enter or exit the market.
The broader market uncertainty has taken its toll on crypto as investors look to sell riskier assets pending a decision on proposed interest rate hikes by the Federal Reserve.
“The Fed minutes have raised expectations that the central bank of the world’s largest economy will now act faster to raise interest rates to fight soaring inflation,” said Nigel Green, CEO and founder of the deVere group.
“As a result, there has been an instinctive sell-off on Wall Street and the crypto market, as some traders believe such a move endangers the liquidity that has benefited many asset classes, including the bitcoin. ”
Bitcoin is a cryptocurrency – a type of online money that is created using a computer code
Ethereum, like Bitcoin, is a digital token that is used on a digital database called a blockchain. It has gained prominence as a popular method of paying NFTs (Non-Fungible Tokens)
Some crypto experts believe low interest rates and government stimulus packages have created a bubble in the crypto market that is poised to burst if investors aren’t as confident in crypto as recent meteoric gains. suggested it.
WHAT IS BITCOIN AND HOW DOES IT WORK?
What are Bitcoins?
Bitcoin is a cryptocurrency – a type of online money that is created using a computer code.
It was invented in 2009 by someone called Satoshi Nakamoto – a mysterious computer coder who has never been found or identified.
Bitcoins are created without a middleman, which means that no bank charges a fee when they are traded.
They are stored in so called virtual wallets called blockchains which keep track of your money.
One of the selling points is that it can be used to buy things anonymously.
However, this has left the currency open to criticism and calls for tighter regulation, as terrorists and criminals have accustomed it to trafficking in drugs and guns.
How are they created?
Bitcoin is created through a process known as “mining” which involves computers solving difficult math problems with a 64-digit solution.
Every time a new math problem is solved, a new Bitcoin is produced.
Some people create powerful computers for the sole purpose of creating Bitcoin, which can require a huge amount of energy to operate.
But the number that can be produced is limited, which means that the currency must maintain a certain level of value.
Why are they popular?
Some people like Bitcoin because it’s a form of currency that eliminates banking intermediaries and the government – a form of peer-to-peer currency exchange.
And all transactions are publicly recorded, so it is very difficult to counterfeit.
Its value surged in 2017, beating the 17th century “tulip mania” and the dot com boom of the early 2000s to become the largest bubble in history.
But the bubble seemed to have burst and questions arose in the long-term market.
However, it has since exploded again and, in March 2021, broke the $ 60,000 mark for the first time.
“If they’re going to hike rates three times in 2022 and keep the program, and the era of low rates is over, we’re really going to see how much people believed in their Bitcoin-crypto thesis,” said Stéphane Ouellette. , CEO and co-founder of the crypto platform FRNT Financial Inc.
“I would expect the Fed to become more and more hawkish, which is very bad for valuations.”
Bitcoin, in particular, has traded more in sync with the S&P 500 over the past calendar year. Analysts believe it is becoming increasingly important to watch stocks when forecasting future moves in crypto.
Founder of Data Trek Research in New York, Nick Colas believes that this month, an important indicator of the health of the market over the coming year should be given careful consideration by crypto investors.
“If stocks are down in January, however, it will be difficult for bitcoin to recover,” he said.
The sudden death spiral comes after the US Federal Reserve released the minutes of a meeting late last year in which the bank suggested it could start raising interest rates to cope with rising inflation rates.
Experts, meanwhile, suggest the decline was expected following the central bank’s insinuation, as the market has been limited and particularly volatile in recent days.
“The market decline is mainly attributed to the US Federal Reserve’s plan to raise interest rates this year to target rising inflation,” said Ashish Singhal, founder and CEO of the monitoring firm. CoinSwitch cryptocurrencies at the Economic Times of India on Monday.
“Like any asset,” continued the crptoexpert, “macroeconomic factors also affect crypto. Investors should keep in mind that risk and reward go hand in hand and that they should do their own research before buying. an asset, not just crypto.
A crackdown on bitcoin mining operations in Kazakhstan, the second-largest mining country behind the United States, also likely contributed to the sudden drop.
Bitcoin has now lost about a third of its value since its all-time high of $ 67,000 in November 2021 – marking its worst start to the year for cryptocurrency since 2012.
Besides Ethereum, other popular cryptocurrencies such as Cardano, Solano, Shiba Inu, and Binance Coin also fell drastically in the weeks following the Fed’s announcement.
The sudden selloff also coincided with a sharp correction in stocks, with the Nasdaq falling 3.34% on Wednesday.