- A crypto rally
- The reason
- Is it all because of Russia?
- Crypto proponents are frustrated
- The extent of loss
- Digital gold
The beginning of 2022 has not been exactly prosperous for the new financial markets. The exchange rates of cryptocurrencies to the U.S. dollar continue to decline. With announcements of new potential bans, investors are starting to sell off risky assets, and the price of Bitcoin has hit record lows.
A crypto rally
In November, Bitcoin traded at its record high, but by now it has shed over 50% of that value, having dropped down to $34,500. Last weekend, we kept following the news of the world’s first cryptocurrency that at first declined, then recovered a bit, and then declined again.
Other digital assets also followed the negative trend, including Ethereum ETHUSD at -1.85%, Bitcoin Cash BCHUSD at -1.23%, Litecoin LTCUSD at -2.34%, and Monero XMRUSD at -1.43%, according to the Kraken exchange.
The decline started on Friday and continued throughout Saturday when Bitcoin reached the lowest level of $34,000. In just three weeks, it has lost almost a fourth of its value.
The reason
The price drop might have been caused by the volatile Wall Street session where investors started selling off their assets.
“Pessimism continues to grow among investors and traders when it comes to riskier assets and this is chiefly influencing the price of equities and bitcoin. The thing with bitcoin is that when it begins to fall, the price action drops like there is no tomorrow,” wrote Ava Trade’s chief market analyst Naeem Aslam in a note to clients. He also added that January has always seemed to be characterized by volatility in the crypto market.
Is it all because of Russia?
On Thursday, January 20, 2022, the Central Bank of Russia proposed to ban all cryptocurrency operations, making crypto storage, transfer, and mining illegal. Currently, Russia is the world’s third-largest player in mining.
Such a move from the Russian authorities can result in unpredictable consequences. It would be just as critical to ban the use of U.S. dollars or credit and debit cards. A quarter of Russia’s adult population is involved in crypto operations one way or another.
The whole world is waiting anxiously for the consequences of this announcement and the potential results of a decision by Russian authorities.
Crypto proponents are frustrated
All weekend, crypto investors hoped that the price of Bitcoin would not decrease below the psychological barrier of $40,000. However, they were disappointed as Bitcoin went down.
“Many altcoins are into support at their summertime 2021 lows, making it critical that bitcoin holds support as it sets the tone for the cryptocurrency space,” wrote Katie Stockton, Managing Partner of Fairlead Strategies, a technical research provider.
Now some experts have become pessimistic and claimed that the decline would continue. However, this downward rally should not be seen as a definite trend. After all, in early 2021 Bitcoin started with the price of $33,000.
The extent of loss
Bitcoin’s market value has declined by $600 billion, while the crypto market has lost over $1 trillion. Crypto stocks also crashed on Friday, for example, Coinbase Global Inc. COIN lost 13.38% and at one point even went down by almost 16% to its lowest price since the stock’s public debut in early 2021.
The Biden administration is preparing an initial U.S. digital asset strategy to be released next month. It has also given federal agencies the assignment to evaluate the risks and opportunities of digital assets.
Digital gold
Such Bitcoin trends are contrary to the notion that Bitcoin is the “digital gold”. Its price is falling as well as the stocks of tech companies. The tightening of monetary policies pushed the price of gold up. Goldman Sachs analytics even stated that the price of BTC could reach $100,000 by taking on gold.
This has not happened. The crypto asset’s volatility has manifested itself, and we have seen a local decline. However, it does not mean that this downward trend will continue. It might still be a good idea to consider buying Bitcoin and adding some altcoins to your portfolio.
