COVID-19
In the period of the declaration of COVID-19 as a global pandemic by the World Health Organization, all markets crashed, along with them the cryptocurrency market.
With the spread of the pandemic, measures were taken to minimize health damage. One of these measures was the closing of businesses and limiting the freedom of every person. The economic damage that was caused due to unemployment and reduced income was very severe.
Of course, the Federal Reserve (FED) intervened to save the situation by announcing the 'printing' of money for the purchase of assets which were at their peak, bringing about the recovery of the markets. It was seen that the FED was not buying Bitcoin or any cryptocurrencies, but it was the investors who felt threatened, so they jumped into the world of cryptocurrencies, considering that it presents the highest risks and rewards. The investments made helped boost the price of Bitcoin from $4,000 to $69,000, ETH from $80 to $4,900, as well as the price of many other cryptocurrencies.
The day everything stopped
After the policies followed helped all markets recover, especially the S&P500 by +112%, it was time to deal with a major problem caused by the policies followed by the FED, inflation. On November 3, 2021, the Federal Reserve announced that it would begin tapering its monthly asset purchases, which dropped from $120 billion to $0 per month. This prompted investors to invest more and markets began their journey to record highs.
But what happened to Cryptocurrencies?
Macroeconomic policies to 'neutralize' inflation caused and continue to cause major problems in cryptocurrency prices. Cryptocurrencies have fallen by at least 80% since their peak prices. This situation also led to the massive crash of cryptocurrencies like LUNA, which wiped $50 billion from the market. Recently Celsius Network has faced difficulties due to the mismanagement of customer funds, we have also seen investment funds like 3AC have problems in the market. All these are the result of investors' fear and uncertainty, withdrawals and massive sales on their part as well as liquidations in the market. Since all this pressure is continuing to lower the price of cryptocurrencies, the question arises: "How long will this situation continue for the cryptocurrency market?"
The current correlation with traditional markets is what makes this stage of the cryptocurrency market different from the market crash of 2018. Looking at the current state and the economic conditions that are favoring this market we can conclude that this situation can continue until at the end of this year, but everything will take a clearer picture during these next months through the policies that the FED will follow. We're likely to be in a bearish trend for the remainder of the summer, and people buying today may end up closing their positions out of boredom and doubt before the market recovers. The safest (slightly less useful) path is waiting for a clear signal from the FED about easing pressure which has left investors waiting for BTC as the largest cryptocurrency in the market to reach $10,000, but than can this price be realistic and can it ever be achieved remains in question.
A drop in price towards the $10,000 level or below would prove fatal for the market as it would result in large-scale selling and liquidation which would push the price lower. According to the analysis, the current state of the economy will lead the market towards a consolidation phase from which we can face an increase in prices for a short-term period, which will create opportunities for liquidation in the market. After that we may see a period of decline in BTC to the $12,000-$13,000 area, but how long this price movement will take to happen cannot be given an exact answer, just know that it could be very close. .
The Future of Cryptocurrencies
Now that we have looked at the key moments in the journey of cryptocurrencies, let's take a look at the future and what it has in store for us.
The "revolutionary new financial system" is trading under $1 trillion. When these price pressures are released, the cryptocurrency market will see light again. The world of cryptocurrencies, very little has changed, people continue to build their projects for a better tomorrow regardless of the state of the market. This stage in which the market is today erases many projects that may be weak or just a scam, which shows us a clearer picture of sustainable projects that are destined to be future winners who will repair the broken TradFi system whose bugs we are currently experiencing.
Today, we are still early in mass adoption. This is because cryptocurrencies are still under construction, proof of concept (Bitcoin) is complete and the underlying infrastructure layers are now being built, tying them together to help the end product (the application layer) thrive. When all three elements are built, then it will be too late, but we are not at that stage today.
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