Recently, the price of bitcoin has fluctuated wildly. It began to slowly recover after dropping below $18,000 in mid-June before taking another dive this week. The market hasn’t yet bottomed, according to a number of experts, and things could get worse before they get better.
What causes the crypto market to crash then? What does this imply for Bitcoin, then? Find out by reading on!
The Decline of Bitcoin Is Not An Isolated Case
Even though Bitcoin’s steady decline has been the focus of recent cryptocurrency news, other cryptocurrencies are also experiencing a sell-off. Similar losses have been experienced by other altcoins, including Ethereum, the second-largest cryptocurrency.
After a week of steady decline, the price of Ethereum dropped below $1000 this past weekend. These drops have a pattern, and many experts think that other cryptocurrencies are also at risk.
In a recent interview, FTX CEO Sam-Bankman Fried reiterated his earlier claim that Bitcoin might in the near future drop as low as $14,000.
Before the next significant upleg, he predicted, “I think we’re going to see a lot more decline in Bitcoin.”
Fried’s forecasts come as Bitcoin continues to exhibit unstable behavior. Bitcoin’s price climbed back to almost $40,000 in early May before dropping below $20,000 this past week.
What is the Sell-Off Caused By?
What, then, is behind this sudden drop in Bitcoin’s price? Many experts think it’s a result of several factors, but the primary two seem to be:
As they take advantage of the recent bull run’s profits, investors are selling their holdings in Bitcoin and other cryptocurrencies.
The overall sell-off of risky assets has an impact on the price of bitcoin. This indicates that investors are dumping Bitcoin and other cryptocurrencies in favor of safer investments like gold.
These two arguments suggest that there is little faith in Bitcoin and other cryptocurrencies. Bitcoin is being sold by investors in order to buy assets they think will be more stable in the current market.
The Implications for Bitcoin
As investors liquidate their holdings, the price of bitcoin might continue to fall in the near future. Many experts still think, though, that as the cryptocurrency market gains acceptance, Bitcoin will eventually make a comeback.
Many people are unsure whether now is the right time to buy Bitcoin in light of the recent decline in its price. While there is no conclusive answer, some professionals feel that since Bitcoin is currently selling for a low price, it is a good time to purchase it.
The market’s future direction is still uncertain. Bitcoin and other cryptocurrencies will remain erratic in the interim. Therefore, if you’re thinking about investing in Bitcoin, do your research and consider the risks.
The Situation With Crypto, Generally
To put it mildly, the crypto market is in a challenging state right now. Many investors have lost faith in the market as a result of the decline in the price of bitcoin.
Additionally, similar sell-offs are occurring in other altcoins, which may indicate that the market has not yet bottomed. Some industry experts continue to have faith in Bitcoin and the cryptocurrency market even though the future is uncertain.
Hedge fund manager Michael Novogratz asserted this belief in a recent interview with CNBC.
We’ve observed these parabolic price moves with great technologies like Bitcoin, crypto, and web3.0, he claimed. Prices for these technologies advanced too quickly.
According to Novogratz, Bitcoin will eventually rise again as market confidence increases. Crypto will not vanish, he declared. “I believe it will play a significant role in our lives in the future.”
Despite Novogratz’s breath of optimism, it is still unclear how the market is currently faring. The market is still unstable and bitcoin is still at its lowest point in several months.
Why Cryptocurrency Prices Have Not Yet Bottomed
Experts think the cryptocurrency market may not have reached its bottom yet, despite the severe blows it has taken over the last few months. Haohan Xu, CEO of Apinify, provided some explanations for why this is the case:
The price of Bitcoin fell as a result of the May 2020 Bitcoin halving event because miners no longer received the same amount of rewards. As a result, there was a decline in the volume of Bitcoin traded on exchanges.
Less Bitcoin was traded, which resulted in a more illiquid market, making it more challenging for investors to buy and sell Bitcoin.
The Dearth Of Investors
Xu thinks that new investors will shy away from Bitcoin because of its steady decline. If we don’t see a new wave of investors, the market won’t really bottom out, he claimed.
Additionally, according to Xu, the majority of the current investors are people who acquired Bitcoin during the 2017 bull run and are still holding onto it today. These investors, according to Xu, aren’t selling their Bitcoin because they don’t think the market will recover and allow them to turn a profit.
Fed rate increase
Recent tapering of the US Federal Reserve’s quantitative easing program could result in higher interest rates. Because it would make Bitcoin less appealing to investors, according to Xu, this could have a negative effect on its price.
The Future of Crypto Is Uncertain
Investors are concerned about the future of cryptocurrency as a value repository. Numerous factors may have contributed to the market collapse, but one thing is for sure: things aren’t looking good for Bitcoin and the cryptocurrency industry right now.
Only time will tell if the market has actually reached its bottom, if this is just the start of its decline, or if it will bounce back and make a significant recovery.