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‘Like Coming Out of Heroin’: How Worse Will This Bitcoin Bear Market Get?

Briefly

  • Cryptocurrencies are closely related to US stocks.
  • Prices are expected to continue their downward trend.

Crypto Winter isn’t coming anymore – it’s here. A bear market. But how bad will it get and for how long? Well, according to analysts who spoke decryptThe worst is yet to come.

Now the real issue is inflation. rising in the USA (and everywhere else) and that the Federal Reserve wants to control it by raising interest rates.

last week the central bank increased 0.75%, the biggest increase since 1994. Fed officials added that more hikes will come this year. Higher interest rates make it harder to borrow money, which means fewer investors are willing to bet on assets with higher perceived risk, such as stocks or cryptocurrencies.

Considered “risky” by many, Bitcoin is falling alongside stocks. According to CoinMarketCap, the largest cryptocurrency by market cap is currently trading at $20,333.59. The current correlation with traditional markets is what makes this crypto bear market different from the 2018 crash.

Bloomberg Intelligence analyst Eric Balchunas said: decrypt That the Federal Reserve would be less likely to step in—as it has done in the past—to help if things get messy and lower interest rates.

“The reason it’s different is because the Fed is serious this time,” Balchunas said.. “Behind every sale in the past was the thought that the Fed would step in if the market really needed it, and they won’t this time.

“And the reason is inflation – a major issue in the election. Normally, they [the Fed] he cares, but they have a bigger problem and that’s the swamp. Markets will have to learn to live without the Fed, and it will be painful. It’s like getting off heroin – the first year will be tough.”

Ah. Do you want some numbers? Scott Norris, co-founder of US-based private Bitcoin miner LSJ Ops, said he still believes Bitcoin can drop to $11,000. During the weekend, fell down $20,000, a key support level, is down more than 70% from its all-time high in November.

“The Fed has been extremely slow to act on inflation or even fully acknowledge its existence,” he said. “Many adults have never experienced a bank run before, and now this is happening first in crypto and equities.

“Maximum pain is coming but it hasn’t hit yet – this time the world’s governments are just handing out bills, not bailouts, while maintaining their own spending levels. The US could bypass the recession entirely and go into a depression first.”

Julio Moreno, senior on-chain macro analyst at CryptoQuant, an analytics firm, was slightly less pessimistic. decrypt He said in an interview that Bitcoin could drop to around $16,000.

“In March 2020, [the crash] “It didn’t take long as the Fed was aggressively providing liquidity due to the pandemic,” Moreno said. “This time he’s doing the opposite.”

Trader and analyst Alex Kruger said the Fed will likely remain hawkish through 2022, pushing asset prices further down. decrypt. He added that S&P could drop to around 10% to 15% lower than current levels in the second half of the year, with Bitcoin following similarly.

“Even for crypto, it’s all about inflation and the Fed,” Kruger said.

As for Ethereum, the second largest digital asset by market capitalization and helping to make crypto more mainstream as the digital fuel powering NFTs, things are not much better. (As of this writing, it has rallied a bit, hitting just over $1,100.)

Lucas Outumuro, head of research at IntoTheBlock, said: decrypt He said that although Bitcoin and Ethereum operate differently from traditional tech companies, they perform like the aforementioned tech stocks, “probably because of an intersection between the types of investors holding these assets.”

“I expect these conditions to continue to drive prices down until macro uncertainty eases,” he said.

During the last Crypto Winter in 2017, Bitcoin dropped from $19,497 on December 15 to $13,831 just six days later. The pain didn’t end there: it continued to decline throughout 2018, until it was valued at less than $3,300 exactly one year later.

Analysts, This Crypto Winter decryptit may be colder or even longer.

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