Has Cryptocurrency Hit Its Bottom? What Current Market Trend Says!
It's the end of 2022 and cryptocurrency struggles in a bearish trend. The market is filled with a lot of fear and uncertainty. Recent news events show a less optimistic lookout for a bullish breakout of Bitcoin and Altcoins.
With the recent collapse of FTX (the second largest crypto exchange in the USA filing up for Bankruptcy) in November 2022, investors strongly demand transparency and independent audits of reserves in centralized crypto exchanges that handle users' money.
On the other spectrum, many crypto coins are upgrading their blockchain technology. Centralized crypto exchanges are progressing in complying with the regulatory framework requirements of different nations. Big crypto exchanges such as Binance, Coinbase, Kucoin and Crypto.com are building and working on the proof of reserve systems with 3rd party independent accounting audit firms, thus establishing higher transparency standards.
Overall, considering the most average scenarios, recent trends in the short term indicate the crypto market is looking to bottom out, and the current prices of Bitcoin ($16,707) and Ethereum ($1,178) at the time of writing show an extended bearish trend.
Currently, predicting the exact price movement for Bitcoin and Altcoins over the short term is difficult as the crypto market has shown the most dynamic volatility with each news event rapidly reflecting the price movements indicating its sensitive nature.
From the news events, let’s understand the possible market trends for the coming six months.
#1 US Fed Interest rate hike:
The US Fed’s CPI report released on Tuesday, December 13, 2022 shows an inflation rate of 7.1% (lower than the estimate of 7.3%). It predicts some positives that the hawkish stance of the Feds is working, removing financial liquidity from the market.
The US Feds is aiming for an inflation rate of 2%. Considering the hawkish stance on controlling inflation, the market expects more rate hikes of 50 basis points (0.5%) on multiple occasions in 6 months.
Interest rates are currently at 4.5%, marking the highest interest rate in 5 years.
The anticipated interest rate hike cycle may see interest rates rise above 5.5% in the USA, fearing recession in the global economy. Such orientation shows a prolonged bear market for the equity and crypto markets. This trend is evident by the falling prices of tech stocks, S&P 500 and NASDAQ indices.
Also, bond yields are trading at their highest, appreciating the U.S Dollar ($) among other fiat currencies.
#2 Binance Fighting Legal Battle:
The US Department of Justice was stalling over bringing possible charges relating to a criminal investigation and money laundering from the previous case of 2018, where the US government criticizes Binance for providing traditional financial services without KYC verification (Know your customer) in the USA.
This news saw users withdrawing their money from Binance worth $1.6 billion (enough money to buy a mansion in Mumbai) within 24 hrs, as well as an increase in the equivalent amount of new deposits from long-term investors. Binance coin dropped its price to its weekly lowest touching $220 and currently trades at $245.8 at the time of writing.
From the Binance side, Changpeng Zhao (a.k.a CZ, CEO of Binance) has stated having adequate reserves, 80% of which are majorly held in USDT and BUSD stablecoins. Binance has implemented and provided cyber security, law enforcement programs, and advisory aid to governments in many developed nations for protecting investors’ money and interest.
On the legal front, Binance has obtained the license to operate in many developed nations such as UAE, France, USA, Bahrain and Kazakhstan.
#3 Economic cycle of cryptocurrency:
Every market operates in an economic cycle. Historical perspective of cryptocurrency and traditional finance witnesses the global economy traveling sequentially through the market top, bottom, recession and recovery. These actions occur because of the monetary policy of central banks of different countries and macroeconomic news.
Cryptocurrencies have a 4 year cycle, where the bull run started right before Bitcoin halving, followed by a 1 year uptrend sequence and the last 2 years a downtrend and price consolidation.
If viewed from an economic cycle perspective, the current setup of Bitcoin and the Altcoins highlights bottoming of the prices and distant trend reversals in the future, with the next halving period for Bitcoin happening in 2024.
We might see a bear market trend reversal for the crypto market around mid-2023 when the interest rate hike cycle of the US feds is expected to peak, and subsequent cutting of interest rates will be triggering points of bullish sentiments.
Also, some positive regulatory news from India on rationalizing the 30% tax rule and 1% TDS on cryptocurrency will help contribute massive bull run, considering the population strength of investors.
The Final Line:
Although the cryptocurrency market seems unregulated, uncertain, and scary, the market is progressing toward stability and maturing from infancy to adulthood.
It is undeniable that the technological revolution this industry brings with its blockchain and web 3.0 to the economy is underrated by many governing agencies and the general public at this point. Instead of banning and running away, looking at wide-scale adoption across the globe and its economic potential, cryptocurrency has to be embraced and carefully placed as an asset class in the financial system.
Cryptocurrency is the ultimate future of the upcoming techno-financial world. Bitcoin and Altcoins will recover to their all-time high (ATH) in a distant time of 3 years. Yet, it is hard to time the exact trend reversal.
From the news affairs, the crypto market is one of the most dynamic markets that shifts its gears immediately from red to green signal, potentially showing the ability to be the leading indicator of the global economy.
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