You’re not alone if you’re wondering when the cryptocurrency market will take off again. Cryptocurrencies once looked poised to upend the entire financial system, but the noise doesn’t go away overnight. Here’s what to watch for. Regulatory changes are underway, so Bitcoin and other cryptocurrencies will soon begin to see a boost in price, But for now, the market is lagging.
Bitcoin is Down More Than 50 Percent
The world’s most popular cryptocurrency has sunk to a record low, falling more than half from its high point late last fall. Bitcoin’s value has fallen to less than $31,000 this week, the lowest since July 2021. Meanwhile, the value of altcoins such as Ethereum, Binance, and Solana have each fallen more than 10% in recent weeks. Meanwhile, dogecoin has also fallen 10% since the start of the year.
Although bitcoin’s price has fallen over the past month, the price trend has been cyclical. Bitcoin reached an all-time high of over $64,000 last November but has lost nearly half its value. On Friday, it was trading around $30,000, a far cry from the $64,000 peak reached earlier this year. The price decline is primarily tied to inflation and rising interest rates, two factors that have sent the broader stock market into a tailspin.
While the Fed’s action has reduced liquidity in the financial system, it also hit the cryptocurrency market. Inflation has been a concern for investors, which is why the prices of most cryptocurrencies have plummeted this fall. The war in Ukraine has disrupted global supply chains, and the U.K. has seen the highest inflation rates since 1981. Many central banks are raising interest rates, including the U.S. Federal Reserve, which raised its benchmark rate by half a percentage earlier this month.
While the drop in crypto is unprecedented, it is not a complete disaster. While many people worry about losing money in cryptocurrency, professionals have been able to weather the past volatility. For example, Simon Peters, chief executive of Bitwise Asset Management, a firm offering cryptocurrency investing services to about 1,000 financial advisers, says that “extreme fear is rampant among crypto traders.
Bitcoin’s Price Tumbled 20 Percent In Last Five Days
The decline in cryptocurrencies has coincided with a broad sell-off in other markets, as investors are worried about the long-term stability of the leading cryptocurrency. The drop in bitcoin’s price is part of a broader sell-off triggered by rising interest rates, inflation, and the Russian-sponsored war in Ukraine. The pandemic ‘hangover’ has also hurt the stocks of companies that thrived during the lockdown. But the crypto fall is more severe than the broader stock market’s – bitcoin’s price has plunged 20 percent in five days alone, while the S&P 500 index has fallen just 5 percent.
The Founders Fund, a hedge fund run by Peter Thiel, has bought millions of dollars in bitcoin and still hasn’t sold a single share. Even with this huge drop, Bitcoin’s price still stands at more than $300 billion, a massive amount in the volatile crypto market. Compared to its past challenges, this dip is only a small hurdle. In five days, the price of bitcoin has lost more than 20 percent.
The sell-off has slowed demand for cryptocurrency, particularly in Japan and South Korea. The country’s stock market has been correlated with bitcoin, dragging down the price. Meanwhile, negative news about the technology has dampened sentiment. Elon Musk, CEO of Tesla Motors, halted purchases using bitcoin in an email to investors. The company cited environmental concerns in the process of “mining,” which requires high-powered computers to solve complicated mathematical puzzles.
Experts believe the Fed’s liquidation will crush the pandemic era bubble in cryptocurrencies. This will lead to a fall in many tech companies and meme stocks. Hence, intelligent investors should take advantage of dips to buy quality crypto tokens rather than bush league tokens. If the dip continues, some companies will be left out.
Bitcoin’s Price Will Rise Above $100,000
Many experts have forecast that the bitcoin price will hit $100k by 2021. Experts include Rick Rieder, Chief Investment Officer of BlackRock Inc., and Adam Back, OG cypherpunk. Bitcoin’s creator, Satoshi Nakamoto, reached out to Back for advice when he first started Bitcoin. He knows the cryptocurrency ecosystem better than anyone.
The future of cryptocurrency is unclear, but investors are increasingly betting on the future of bitcoin. Top hedge funds and money managers are betting on a massive bitcoin rally. Despite negative press, these investors are betting on a speculative asset and not a store of value. Bitcoin has soared by more than 160% in the past six months, thanks to solid institutional demand. It hit its high in December 2017, with a price of just under $20,000 for the first time.
Many experts predict that Bitcoin’s pPricewill reach $100,000 within the next year or two. According to Tom Lee, co-founder and head of research at Fundstrat Global Advisors, bitcoin could hit $100,000 a year. If it does, investors should buy it as soon as it crosses the 200-day moving average. He believes the digital currency could rally strongly into the year end due to new tax reporting requirements.
The Bitcoin market will experience its fair share of challenges. However, it will ultimately rise above $100 in the future. Goldman Sachs recently claimed that Bitcoin’s pPricewill reach a hundred thousand dollars at some point. This is due to a recent study of the digital asset’s use as a store of value.’ Goldman Sachs’ study uncovered that Bitcoin could have broader applications than just a store of value.’ While the digital asset market is more significant than Bitcoin’s, the comparison of Bitcoin’s market cap to gold will help investors determine whether Bitcoin will reach the predicted Price.
Regulatory Changes Are Underway
Legislators are mulling over new regulations in the cryptocurrency industry. The House of Representatives passed a bill to create a working group to study digital assets. The group would produce a report within a year. However, its fate is still uncertain in the Senate. The SEC and CFTC have already formed a cross-agency working group on crypto.
The CFTC has no permanent head, but an acting comptroller has been selected. Its new chief, Chris Brummer, has a background in crypto and is widely respected in the industry. The Office of the Comptroller of the Currency has also called for more regulation. While the new chief of the OCC has called for changes, current rules are designed to protect customers’ money and prevent money laundering and terrorist financing.
Several recent developments in the crypto space have highlighted the need for regulation. Since Bitcoin and cryptocurrencies were created to eliminate the middleman, governments and financial institutions are taking notice of this new way of transferring value. Various recent settlements between BitMEX and regulators indicate that government action is necessary.
Moreover, digital assets present new risks to investors, consumers and businesses. These risks extend beyond the risks of criminal activity. In addition, digital assets also expose the risk of money laundering, illicit financing, national security and human rights, and climate change. As a result, regulation must evolve to protect consumers and business interests. So, when the cryptocurrency market takes off again, lawmakers must address the risks associated with these assets.
Despite the risks involved, the new technology behind cryptocurrency can benefit both government and private businesses. Cryptocurrency payments can be made conditional on deed transfer by reducing the need for lawyers. Furthermore, banks will be able to mitigate risks with cryptographic proof.