Bitcoin’s fall has caused panic among holders of the first cryptocurrency. Bitcoin rebounded from the bar below $27,000 as the sell-off in stocks eased and a lull settled in global markets.
The fall of the crypto market
The world’s biggest digital token added as much as 5.4 percent on Tuesday. At one point, Ethereum was up 6.4%, and other coins, including Solana and Avalanche, also went up. Crypto’s recovery came at the same time when stocks rose all over Europe, highlighting how the assets of these two classes trade in tandem.
Bitcoin’s recent decline has brought the world’s first cryptocurrency to the level of mid-2021, thus reversing a bull market that reached its peak last November. Whether the lull will continue is uncertain. Governments are tightening the monetary policy to oppose rampant inflation, thus restraining liquidity and creating significant hurdles for speculative assets, such as crypto.
It could be even worse
Michael Novogratz, the billionaire crypto investor and the head of Galaxy Digital Holdings Ltd., warned that he expects bitcoin to fall even more before its subsequent rise. One of the problems facing digital assets is their increasing correlation with the trading in technology stocks, which are suffering from an increase in interest rates.
“Crypto probably trades correlated to the Nasdaq until we hit a new equilibrium,” Novogratz said at Galaxy’s first-quarter media conference on May 9. He also commented that investors may face “a very choppy, volatile, and difficult market for at least the next few quarters before … we’re at an equilibrium.”
Stablecoin’s fall
The cryptocurrency market is also watching TerraUSD, an algorithmic stablecoin that tends to maintain a strong peg to the dollar. The peg weakened, and the value of the token fell to nearly 60 U.S. cents before climbing back above 90 cents on Tuesday.
Do Kwon, founder of Terraform Labs, which powers the Terra blockchain, is moving to strengthen the stablecoin. Luna Foundation Guard, an association formed to support the Terra blockchain and its token, promised to lend about $1.5 billion in bitcoin and TerraUSD to help strengthen the TerraUSD peg.
Earlier, Kwon attracted the attention of the crypto community by implying that the company would buy up to $10 billion in bitcoins to support TerraUSD. According to CoinGecko, the Luna coin, operating in tandem with TerraUSD, has dropped about 50% in the past 24 hours.
Experts’ predictions
Bitcoin has decreased more than 50% since hitting the record value of nearly $69,000 in November 2021. So far this year, it has been behind both global equities and gold. The recent crisis has also pulled it out of the narrow trading range where Bitcoin has spent most of this year, prompting some technical experts to predict an even bigger downfall ahead. Short bets against bitcoin rose to a record high, according to data compiled by CoinShares.
Jeffrey Halley, a senior market analyst at Oanda, stated that technical trends suggest a Bitcoin fall into the $17,000 area.
He wrote, “That is a big call, and it does seem to be making a stand ahead of $30,000.00. Realistically, it needs to reclaim $37,000.00 to change the technical outlook and give the HODLers hope of a good night’s sleep.”
