Despite the recent decline in Bitcoin, investors remained on the sidelines as a slew of negative factors kept pushing sentiment lower. For most of the day, Bitcoin was trading above the $20,000 mark. However, it later fell back and was trading at around $20,005.46, according to data from coin metrics. It had dropped as low as $17,601.58. In contrast, Ether managed to gain more than 1% to $1,102.86.
Despite the recent recovery, Bitcoin is still around 70% below its all-time high, which was reached in November. It’s also down 57% so far this year. According to Yuya Hasegawa, a market analyst at Bitbank, the uncertainty surrounding the global economy still has the potential to negatively affect cryptocurrency.
Despite the recent recovery, Bitcoin’s weekend decline was not deep enough. According to Hasegawa, the Fed’s decision to raise interest rates last week did not change the central bank’s outlook on inflation. He also noted that the Fed may still raise rates too aggressively to drive the economy into a recession.
After several prominent lending companies went bankrupt, investors are now turning their attention to crypto-focused firms that promise high returns on their deposits. In response to the market’s downturn, several companies in the cryptocurrency industry have announced layoffs. Coinbase, for instance, said last week that it would be laying off 18% of its workforce.
Besides factors directly affecting the cryptocurrency market, other macro factors such as the upcoming rate hikes by the U.S. Federal Reserve are also contributing to the decline. According to Charles Hayter, the CEO of CryptoCompare, a recession is possible due to the rising interest rates and the likelihood of inflation. Hayter noted that a recession would be triggered by the Fed’s rate hike cycle.
Market Bottom?
Some experts believe that the market has entered a bottom. They noted that the recent decline in prices could be the beginning of a bear market.
According to Giles Keating, the director of Bitcoin Suisse, the excess leverage in the market has already been removed from the system. He noted that a bottom could be forming shortly.
Leverage is a type of trading that allows investors to get into positions with lower initial capital.
Dil Bole Oberoi
