What is happening to the main cryptocurrencies now and what is the reason for the fall?
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To begin with, the correlation between cryptocurrency and the stock market is becoming very noticeable. Where the stock market and the global economy go, there goes the crypto. We also see that institutional investors such as Goldman Sachs are starting to issue crypto-currency loans, and more and more other institutional funds are entering crypto. And in each of these markets, there are two cycles that replace each other: bullish and bearish.
Bull Cycle
During this period, investors are not hindered by anything and they have the most favorable conditions. Under such conditions and in the absence of a crisis, people invest in the market, and it grows. For example, in 2019, a bull cycle began for Bitcoin. It lasted until 2021, growing by almost 2000%.
Bear Cycle
This is characterized by decline. Assets like Bitcoin lose approximately 80-90% of their value. The fact that we are now in the red zone is quite normal because later the price will rise again.
The arrival of the bear cycle was necessary to unload a rather “inflated” market. In fact, it was supposed to come even earlier, but this was prevented by the coronavirus pandemic, which hit the world economy hard. Then we saw a sharp decline in all assets: the stock market fell, followed by the cryptocurrency market, meanwhile investors panicked. Then the US Federal Reserve System started printing dollars on a large scale and flooded the market with money.
Recently, the Fed increased interest rates, i.e. began to “suffocate” the market, which also helped the bear cycle along.
Bitcoin Price: Fall of Bitcoin
Given that Bitcoin has already fallen 74% from its peak value, it can be concluded that we are not far from the bottom of the market, after which it will start to rise again. Now is the golden time, because everyone is afraid and panicking, selling their assets, but they actually need to be buying. In a few years, we will see many new crypto millionaires and billionaires who were not afraid to invest today.
Why is US Fed Policy Affecting BTC and ETH?
Our team sees a direct correlation between the fiat dollar and cryptocurrencies. The dollar is considered the strongest world currency. Looking at the dollar index, you can see that it has never been as strong as it is now. The US Fed is now doing everything possible to fight inflation. They promise that they will land the market smoothly to normalize the economy. However, there are doubts about their ability to cope with the plan without a sharp recession. At the last meeting, the Fed raised the interest rate by 75 basis points – for the first time in 30 years.
Investors are panicking watching the stock market now in the red zone and this is affecting Bitcoin, Ether, and other cryptos as there is a correlation between the stock market and cryptocurrency.
Regarding the impact of Bitcoin price on Ether, it is explained by the tool of Bitcoin dominance. This tool shows us what percentage of the entire market capitalization is concentrated in Bitcoin itself. The outflow of money from Bitcoin goes to altcoins. The first of these altcoins is Ether, followed by all the rest.
What other reasons are there for major cryptocurrencies to fall?
All of us have read many times in the news that China or some other country has banned cryptocurrency. Rumor has it that the market fell because of this. But in reality, this news only partially explained the logic of why the price of cryptocurrency can decrease.
Market makers began to attack the market through stablecoins. Since most of these stablecoins are algorithmic, they have their drawbacks. We witnessed a recent situation with the Luna Foundation project and their stablecoin Terra (UST). They found a vulnerability and mined the coin. Panic began among investors, because this was the first time that a stablecoin collapsed like this. The price fell by 99% after its untying from the dollar.
Accordingly, everyone who kept their funds in the so-called electronic dollar began to lose them. Taser (USDT) was also manipulated. The largest stablecoin at times fell by 5 percent, which is a lot. Then came the attack on the throne stablecoin (USDD). Its owner, Justin Sun, has stated that his stablecoin will be secured by at least 130%. But as practice shows, even such stablecoins can be attacked.
Because of such attacks on stablecoins, people panic and do not know in which currency to hold assets. I think that this is all done artificially. Given the number of queries about Bitcoin on Google, there is now an extraordinary amount of interest in it. There are reasons for this: an increasing number of people understand that the prices of cryptoassets are attractive. And, Bitcoin is a fully decentralized cryptocurrency and the only deflationary tool for 2022, because it has a limited emission.
Bitcoin price and banks
What are banks doing now? If you put funds in foreign currency into the deposit account, they still charge 1% per annum. Dollar inflation was already 8.6%, which is a lot of money for billionaires. And now they are thinking: where should I transfer my funds from fiat? And since Bitcoin is a deflationary tool, you can hide from inflation there.
Even gold has inflation and risks. The only way to destroy Bitcoin is for the Internet to disappear all over the world. For this, the apocalypse must happen, and then everyone will no longer be interested in economic benefits and money.
Bitcoin price: Will it go below $10,000?
We have analyzed and seen that corrections on Bitcoin always range from 80% to 90%. If we take a 90% drop, the price of Bitcoin will be $7000. This scenario is generally possible, but only through whale manipulation. Bitcoin has little chance of falling to $10,000 and below. There is always a possibility, but we recommend treating it as a manipulation so that “big hands” can buy more bitcoin from “weak hands” (new to the market) who will dump this cryptocurrency.
As the US Fed tightens the rules on the stock market, this will cause the entire market to fall even more. But zones below $20,000 are the best for cryptocurrency accumulation. And after the bear market, in which predict will stay until the end of this year, a bull market will begin.
Fall of Bitcoin: Will it lead to the collapse of the entire crypto-asset market?
Fears about the collapse of the stock and crypto markets, the correlation of which we have already explained, are in vain, because the collapse comes spontaneously, as it happened with the subprime crisis in 2008. The global economy will change, of course, affecting Bitcoin and Ether.
We have all seen situations with projects like Ripple (XRP) or BNB and their skirmishes with the US Securities and Exchange Commission (SEC). BNB fell sharply by $200 while under the microscope. Of course, it quickly bounced back.
Since 2020, the SEC has been conducting a lawsuit against the Ripple project. The process will continue for an unknown amount of time, and the price of the token has already fallen to less than $1.
We see this kind of manipulation with all cryptocurrencies except Bitcoin. This is because each cryptocurrency is tied to a founder. And no one is fixed behind Bitcoin. That is why it is considered the strongest and safest cryptocurrency.
95% of cryptocurrencies on the market are projects that no one needs, which are inflated by influencers. Only 5% really provide solutions to certain problems. Therefore, we recommend holding Bitcoin and Ether as basic assets, and selecting altcoins very carefully.
If, for example, Bitcoin falls by 30%, then altcoins will fall by 60%, and some may not survive this fall at all. If Bitcoin grows by 30%, then altcoins can show a growth of 60-80%. They are considered riskier, but you can earn much more on them if you use the rules of risk management correctly.
Will confidence in digital assets decline after such volatility?
Let’s put it bluntly: there are manipulators in the market. We don’t know who they are, but they are the people who generally run the world’s financial system. And people may lose faith in altcoins because of them.
It is impossible to lose faith in Bitcoin. With inflation on the rise, keeping your money in fiat is very dangerous, especially for people who have a lot of that money. Of course, for those who keep $1,000 under their pillow, pennies will burn at 8% inflation. But if you have several billion in assets, millions will burn under the same conditions. People already understand that if they invest in Bitcoin now, in five years they will be in the black.
Bitcoin price: Should we expect BTC to return to $35,000+ and ETH to $3,000+?
In the next bull market, we expect Bitcoin to reach $100,000. We also expect significant growth in Ether, as it is the platform on which most cryptocurrencies are launched. It’s only a matter of time.
Even now, when Bitcoin is at the $20,000 mark, there is panic in the market. If it goes lower, the news will be full of reports like “cryptocurrency is going to crash” and “it was all a bubble” and the like.
Why is this done? To sew panic. People will start selling and taking their losses. And this means that the cryptocurrency needs to be sold to someone. And if someone buys them, then that person understands something.
In 2021, Bitcoin reached $66,000. There were reports that we were going to $100,000. This was already a good sign to lock in your margin. After all, all this was done in order for people to buy bitcoin – from those who bought it at a much lower price. That is, it is a game of big players on the market who know what they are doing. People are susceptible to manipulation if they do not understand what is happening in the market.
What should and shouldn’t crypto investors do during BTC and ETH volatility?
1. Do not watch the news
2. It is worth working out a trading strategy
3. It is worth dividing the balance for investing in crypto into several parts and use it as a measure of the decrease in the price of cryptoassets
4. Do not expect to catch the bottom of the market, because it is a matter of luck
5. Don’t worry about the cryptocurrency falling and never recovering
For example, I currently have 30% of my balance in positions. When Bitcoin reached $17,000, I bought another 10%. When it reaches $15,000, I will buy more. This strategy is more profitable than going all 100% now when Bitcoin is worth $20,000. This is because there is a chance that it will reach $10,000 or even lower. It’s risky – your nerves may not be able to withstand it.
Calling the current market situation the end of the Bitcoin era is not appropriate. Investors are beginning to understand the power of Bitcoin. This cryptocurrency appeared after the mortgage crisis of 2008 and is the first deflationary tool on the market. Therefore, trust in it is growing, and we see that the future lies in digital assets, namely Bitcoin.
About the author
Vladyslav Zadorozhniy is the founder of CryptoCrew , the largest educational crypto community in Ukraine. The team’s main goal is to explain to users that cryptocurrencies are not about “easy and fast money”, but about knowledge, skills, and abilities. They have 95,730 active subscribers in Telegram and a closed community of 5000 people in Discord.
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