Bitcoin Sags in 2022 Under Weight of Stock Selloff and Fed Policy

The Federal Reserve casts a shadow over cryptocurrencies.

Like stocks, cryptocurrencies extended their sell-off earlier this year as central banks are expected to raise interest rates as early as March.

According to CoinDesk, Bitcoin, the largest cryptocurrency, is down 8.7% so far, while Ether, the second largest, is down 14%. Spread to listed crypto companies. Coinbase Global Ltd.

Currency -1.13%

So far this year down 12% Marathon Digital Holdings Ltd.

Mara -4.68%

It has decreased by 21% Ltd.

riot -6.47%

It’s down 16%.

micro . strategy Ltd.,

MSTR -1.68%

It creates business software, but has invested billions of dollars in Bitcoin, and its CEO Michael Saylor has become a supporter of Bitcoin, down 16%.

On Tuesday, the price of Bitcoin rose 1.7% to $42,407. Most observers say that the $40,000 level in Bitcoin is the sand streak for the bulls and expect aggressive trading in this range. “Bitcoin price behavior is likely to remain volatile as a result of the hawkish Federal Reserve,” said Naim Aslam, analyst at AvaTrade.

Over the past two years, Bitcoin has enjoyed a massive recovery and the entire crypto market has become mainstream. Traditional investors have entered cryptocurrency in droves. Crypto proponents have been fixing the so-called “institutional fund” for years, but the boom has turned out to be a double-edged sword.

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According to IMF analysts, sentiment in the traditional and crypto markets is likely to affect other markets. “Bitcoin’s sharp drop in price could increase investor risk aversion and reduce investment in the stock market,” they wrote in a blog last week.

The cryptocurrency market declined along with US stocks during the first two weeks of this year. Both markets have struggled with the same dynamics: Investors are dumping risky assets in the face of the Federal Reserve’s plans to tighten monetary policy later this year.

The trend of bitcoin trading so far this year is the same as that of the tech-dominated Nasdaq Composite Index, which is down 7.3% so far.

According to CoinMarketCap, the value of the entire crypto market has fallen by about 34% to $1.97 trillion since it reached a market capitalization of $2.97 trillion in November.

One sign of crypto’s decline is the quiet reaction to the authoritative sparks: Elon Musk’s tweet. “Tesla merchandise is available for purchase at Dogecoin,” founder of Tesla Inc. I wrote on Twitter on Friday..

Dogecoin rose about 10% in the two minutes of Mr Musk’s tweet, but returned to pre-tweet levels in the afternoon and fell by about 17% from the tweet on Monday afternoon.

However, big sell-offs are common in crypto. Bitcoin is down about 39% from its all-time high of $68,990 on November 10, according to CoinDesk. It constitutes a serious stock market crash, but it’s not even the biggest drop in Bitcoin in the past 12 months. From April to July of last year, cryptocurrency prices fell by 52%.

Coinbase is down 32% as Bitcoin breaks the record. Marathon Digital is down 60%. Blockchain Riot decreased by 49%. MicroStrategy by 43%.

It’s bare market territory even for crypto stocks, but it doesn’t stop crypto speculators from saying that the market is ready for a turn.

“The mixture of hope and pain has taken the cryptocurrency market to the next step,” said Lucas Otomoro, head of research at research firm Into The Block.

The Securities and Exchange Commission (SEC) has not announced major actions on large-scale crypto exchanges, but the commission has threatened to sue companies that provide loans to cryptocurrency. Dion Rabouin of the Wall Street Journal explains why this part of the cryptocurrency market has responded so strongly. Photo: Mark Renehan/Associated Press

write in Paul Vigna ([email protected])

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