Digital Gold, Not so Golden

2022 has not been the kindest year for the Crypto sector. The previous conception of Bitcoin being digital gold has been completely thrashed. It has now come to resemble other risky assets like equity markets. 

How did this happen? Let’s get to know some facts which led to the decline of the once famed asset class.

“Mining no more.” – China 

Bitcoin peaked at $68,974 on November 9, 2021. It has fallen to less than one-third of its peak value. It all started with all crypto operations being banned in China in late September 2021, which was the hub of crypto mining then. The miners had to shift their operations to countries with lax or no Crypto regulations. This led to a decrease in everyday volume in BTC.

Invasion diversion 

Later the prices stabilised and supported to form a vague consolidation due to an increased volumeof transactions as donations flooded Ukraine to help it against the Russian Invasion. 

The Fall of LUNAtics 

But the bad news kept on hitting BTC and the crypto market. when Terra Luna, the sister coinof Luna, lost its peg against the dollar, Luna which was faring at the $75-120 range dropped to virtuallynothing. This had a devastating impact on the overall crypto market which is yet an immature market.

Celsius is dropping, and The Three Arrows freeze. 

Due to this crash, venture firm Three Arrows Capital (3AC), which had over $500 million worth of Luna, suffered an irreparable loss. Later, crypto lending major Celsius also had to stop its operations stating the reason to be “extreme market conditions”, but actually it was internal indiscipline and hacks. Due to decentralised but unregulated nature of crypto lending firms, there has been indiscipline and overleveraged positions have been taken by these firms in greed of higher returns. You know with higher returns, we see higher risks too. 

The long-brewing trouble of 3AC finally got revealed when it failed its payments to its lenders and the subsequent liquidation. 

Rate Hikes, Market dives 

Crypto decline is further aggravated by the increasing interest rate hikes and fears of incoming recession. Demand overall in the financial markets, commodities, stock indices, and the crypto sector has been down, leading to prices declining overall. Fed Chair Powell, in his testimony, focused on Price stability, and the main tool to make it possible, he suggested, is a continuous interest rate hike to bring inflation to 2%. 

What are the implications of the interest rate hike and how fears of the Recession may become reality? Stay tuned as I will explain it in upcoming articles only on Market Insights. 

Exploding Energy Prices 

Increase in oil prices due to war sanctions and the inability to increase production capacities has led to lower returns for crypto holders and miners.

Volume Dip 

What do we do now? 

You might ask. Well, Currently, BTCUSD is at another support consolidating near the 19,900-18,700range, but it won’t last long as volumes are declining and people are running away fromrisky assets. Buying on Dips has become a nightmare even for crypto aficionados. 

Short the crypto market when there is a clear breakdown from the current range. as the futuredoesn’t look so bright especially for BTC. A further breakdown from this range will have support at the $17,500, $16,200, and $14,000 ranges. 

In the shorter timeframes, you can still use good technical analysis to earn money but remember totrade with the trend. 

Do not worry if the market has transitioned from bullish to bearish. Smart traders earn in both markets because they are not emotionally attached to the asset or the trade they are taking. We too can witness some reversals anytime as fundamental assumptions have completely changed in the past few years due to worldwide pandemic, war, and financial indiscipline of firms. Well, it might be interesting enough to note that in history we have seen such events and their impacts individually but all of these happening in a span of a few years can easily blow any mind away. This has become possible due to the emergence of a multipolar world. 

The future might be uncertain but with guidance from Market Insights, you can be certain to earn money and stay afloat in any crisis. So, follow us for more such content! Happy Trading.