what happened
Most cryptocurrencies have fallen today as heavy sales resumed from last week due to most of the same concerns about the Fed’s ongoing policies and economy.
The world’s largest cryptocurrency price for the last 24 hours (as of 9:50 am today), Bitcoin (BTC)Has fallen by more than 5% to about $ 20,780.
The price of the second largest cryptocurrency in the world, Ethereum (ETH)Dropped almost 7%, meme token prices Dogecoin (Doge) It has decreased by almost 6%.
So what
Cryptocurrencies didn’t work as the Federal Reserve changed to hawks this year to tackle inflation. This will raise the federal funds rate, which is the benchmark overnight lending rate, from virtually zero to 1.5% to 1.75% after the latest 75 basis point (0.75%) rate hike last week. is included.
Image Source: Getty Images.
As rates go up, safer assets like US Treasury bills generate more, so higher risk assets like cryptocurrencies don’t tend to work either. In addition, Citigroup Earlier today, we raised the expected chance of a recession to 50%.
“The global economy continues to suffer from severe supply shocks that are pushing up inflation and pushing down growth,” said Nathan Sheets, Citi’s chief global economist. “But recently, two more factors have emerged. Central banks are gaining momentum in the fight against inflation and raising policy rates, and global consumer demand for commodities seems to be softening.”
The Fed has also begun shrinking its huge (about $ 9 trillion) balance sheet. This means running out of bond holdings. It is essentially a move that removes liquidity from the economy and can further hurt Bitcoin.
“In a liquid world, Bitcoin in this world works well,” Ian Harnett, Chief Investment Officer of AbsoluteStrategy Research, recently told CNBC. “When that liquidity is deprived-and that’s what central banks are doing now-and you’ll see those markets under extreme pressure.”
Harnet believes that Bitcoin’s price could drop to $ 13,000. This will definitely reduce other crypto markets.
Recently, as Bitcoin prices have fallen, there has been pressure on large Bitcoin sellers and investors. Cryptographic intelligence service Arcane Research recently pointed out that the sharp drop in Bitcoin last weekend could be the result of the largest Bitcoin spot ETF losing half of its assets under management.
Purpose Bitcoin ETF It seems that he lost more than 24,500 Bitcoin tokens last Friday. This is the largest since it was published on the Canadian Stock Exchange in April 2021. Withdrawal of assets required ETFs to sell about $ 500 million in Bitcoin. It was not suitable for the dynamics of supply and demand. Arcane analysts believe that the sudden withdrawal of funds could have been caused by a “massive liquidation coercion seller.”
So
I certainly agree with Harnet that Bitcoin prices could continue to fall as the Fed continues its efforts to reduce its balance sheet. However, it is almost impossible to try to time the market.
In the long run, Bitcoin and Ethereum will stay here and I think they are suitable for long-term purchases at these levels. I wasn’t a fan of Dogecoin. Because it is useless in the real world and has no technical advantage over other cryptocurrencies. Therefore, it is advisable to avoid meme tokens.
