What is pulling the crypto market down? What is the next step?
The cryptocurrency market has a deep connection with volatility. This means that any coin or token can go up or down in a matter of minutes. However, this attribute of the industry is as exciting to traders and investors as it is risky.
Over the past few years, we've seen volatility affect the prices of several major tokens. If you compare it with previous years, 2021 did not turn out to be so notable for Bitcoin. Therefore, its entry in 2022 was also slow. Uncertainty and fear among cryptocurrency users have caused the market to fall in recent weeks.
Bitcoin sinks, followed by altcoins: it's a bloodbath!
The price trajectory of most tokens in the crypto market has been slow since the last week of December. However, it was predicted that in the new year the market could rise and gain some stability. But the leading cryptocurrency is stuck in tight ranges from $44,000 to the $50,000 mark.
Little did we know that the worst was yet to come. The recent price drop has seen BTC prices fall below the $43,000 mark. It is now priced below $42,700. Many investors have placed a stop loss around this mark. A decline in the support level may indicate that the bearish trend will remain longer than expected.
At the end of last year, Bitcoin and Ethereum reached their all-time highs. However, both currencies have experienced ups and downs since then. Experts believe that the market is expecting even more volatile surprises in the coming days. Therefore, they advise not to invest deeply in the asset class under the current circumstances, but first to find out which are the best cryptocurrencies in 2023.
With BTC and ETH prices falling, other popular crypto tokens have also lost a significant portion of their value. Almost all altcoins, including SOL , ADA , BNB , XRP , AVAX , and DOT , lost double-digit percentages in the last 24 hours. The market is drowning in red candles, which is not a good sign at the beginning of the year.
What does the price drop mean for the crypto market?
There are several reasons that can explain the disappointing performance of the cryptocurrency sector. These stagnant prices were also affected by the Chinese cryptocurrency crackdown and Omicron's new COVID-19 variant. Statements from US financial authorities and government officials have also not helped the digital asset industry.
Different countries regulate cryptocurrencies. Therefore, the crypto community doubts what the future holds for them. While market fluctuations were expected, the recent price drop was not anticipated. Therefore, it may take some time for the market to recover.
Investors are in a rather difficult position in the crypto market. Many of them have reached the breakeven point and some are still waiting for the market to go up. So they hold on to their assets. However, if Bitcoin does not recover in the coming days, it may fall to $38-40k. This will not be a positive outlook for the cryptocurrency market as a whole.
Last thoughts
A disruption in the cryptocurrency market can be the result of several factors. However, the recent drop in prices is a blow to the industry. Huge investments were pulled out of the market as the global cryptocurrency market capitalization fell to $2.04 trillion. However, the role of whales and institutional investors is important at this time. This will set a clearer trend in the coming days.
Also Read: Cryptographic Signals: A Beginner's Guide