Why Is Crypto Down Today: The Future of Cryptocurrency
The Bitcoin price is struggling to keep its small 0.23 percent gain on Oct. 20, but most crypto prices are going down. The market as a whole is still in a sharp declining trend. Many investors think that $20,000 is a psychologically important resistance and support level for the Bitcoin price. But the price continues to trade below that level. And in the past month, the question Why is crypto down today was surely in every investor’s mind.
The long slump in crypto prices is probably due to concerns about the U.S. Federal Reserve’s “lack of progress” in bringing down high inflation. On Oct. 20, Philadelphia Central Bank President Patrick Harker said. We’re going to keep raising rates for a while. He said this because he thought that higher interest rates hadn’t worked to stop inflation.
Many economists think that the Fed’s aggressive rate hikes are another policy mistake. The first was waiting too long to deal with rising inflation. And that a fiscal crisis will start in 2023. The September consumer price index (CPI) showed that prices went up by 0.4%. The Bureau of Labor Statistics says that consumer prices are 8.2% higher than they were a year ago.
Consumer prices have gone up by 0.4%. And the core CPI has gone up by 0.6% since September and 6.6%. Over the past 12 months when energy and food prices are taken out of the equation. In short, the last thing the Federal Reserve wants is for prices to go up. Instead. Rate hikes by the Fed are meant to calm down the economy and slow down high inflation.
Since the higher-than-expected report on Oct. 13 is likely to lead to another round of 0.75 percent increase hikes in the coming months. The economy is likely to cool down even more than expected. Due to the high correlation between crypto and stock markets, Bitcoin’s price tends to move in the direction of the S&P 500 and the Dow. In addition, several economic events in the middle of October could continue to pressure crypto prices.
Important economic events that have a history of affecting how investors feel about the crypto market happen on the following dates:
October wraps up on the 17th: Earnings in Q3
The Personal Consumption Expenditures (PCE) price index comes out on Oct. 28.
Many big U.S. companies report quarterly revenue this week, and the outcomes are chaotic. This is making the stock market more volatile. For example, Tesla’s (TSLA) stock fell 6.2% after the electric car company missed its Q3 earnings goal.
The company blamed delivery and production problems.
In addition to these upcoming events. The strength of the U.S. dollar and what seems to be a serious hike in the controversy between Russia and Ukraine. Continue to weigh on all markets. As a result, people who bought Ethereum, Bitcoin. And other cryptocurrencies early on have made a lot of money.
Wu. a crypto manager, says, “In the past year, we’ve seen that a down market can quickly turn into a bull market. But the cryptocurrency market has a long history of being very unstable. Which is different from what investors want when the market is uncertain. For example, Bitcoin has had several big drops of more than 80% in its history, the most recent of which was in 2018.
The original crypto isn’t tied to any physical assets or intellectual property and doesn’t make money for investors or pay them dividends or interest. Experts say that BTC prices are only affected by supply and demand, making it hard to determine their real value.
The CEO of Berkshire Hathaway, Warren Buffett, and a legendary investor, once talked about Bitcoin’s flaws at Berkshire’s annual investor meeting. He told investors he wouldn’t pay $25 for “all of the Bitcoin in the world.” “I wonder if it will go up or down in the next year, five or ten years. “One thing I know for sure, though, is that it doesn’t grow or make anything,” he said.
Bitcoin and other cryptocurrencies could eventually stop being so volatile and stop being linked to other risky assets. Still, the recent price action on the cryptocurrency market suggests that investors may have a rough ride for a while longer.
Should You Buy When Crypto Prices Fall?
When buying the dip, buyers in crypto should be very careful. When prices drop as quickly as they have recently in the crypto market, that coin you’ve been eyeing can look like a great deal. “Never try to catch a falling knife,” says an old Wall Street proverb that fits situations like this well.
Using your creative abilities, you should be able to see that “buying the dip,” or catching a falling knife, almost always ends in pain. Of course, that doesn’t mean smart investors cannot profit quickly when the market is very volatile. But the point is that big, quick changes in the market can be scary for the average investor.
Reasons Making Crypto Down Today
Let’s look at three reasons why the prices of cryptocurrencies will keep going down in 2022. These factors play a significant role in crypto being down today. Interest Rate Increases by The Federal Reserve-Why is Crypto Down Today
When interest rates go up, it costs consumers and businesses more to borrow money. This raises the costs of running a business, the cost of goods and services, the cost of making things, wages, and, in the long run, the cost of almost everything. This is the top-notch reason for making crypto down today.
The main reason the U.S. Federal Reserve is increasing interest rates is that inflation is high and can’t be stopped. However, since March 2022, when rate hikes started, Bitcoin and a correction has occurred in the other bitcoin market.
Risk assets tend to move before equities when there are changes in monetary policy or ways to measure how strong the economy is. The Fed started letting people know in 2021 that it planned to raise interest rates at some point, and data shows that the price of Bitcoin will drop sharply by December 2021. In a way, Ethereum and Bitcoin were the canaries in the coal mine that showed.
what was coming for equity markets
If inflation starts to slow down, the economy gets healthier, or the Fed starts to signal a change in its current financial markets. Risk assets like Altcoins and bitcoin could again be the “canaries in the coal mine” by showing investors are willing to take risks again.
The Constant Threat Of Regulation-Why is Crypto Down Today
The cryptocurrency industry and regulators sometimes get along because of misunderstandings or mistrust about digital assets’ use. Without a working framework for regulating the crypto sector, different countries and states have a lot of different rules about how to classify cryptocurrencies as assets and what makes a legal payment system.
More clarity in this area helps innovation and growth in the sector. However, many analysts think cryptocurrencies will become mainstream once there is a set of laws everyone can agree on and understand. In addition, investor sentiment greatly affects risk assets, which is true for Bitcoin and other cryptocurrencies.
Even now, the possibility of unfriendly cryptocurrency regulations or, in the worst case, a complete ban affects crypto prices almost every month. Moreover, scams and Investment schemes led to liquidations and setbacks for investor confidence over and over again.
Ponzi schemes, Scams, and sharp market swings have also had a big impact on the crash of cryptocurrency prices in 2022. So it’s a big push for making crypto down today. Unfortunately, due to the lack of regulation, the youth of the cryptocurrency industry, and the size of the market compared to equity markets, bad news and events that make the market less liquid tend to have disastrous effects.
The implosion of Celsius Network, Terra’s LUNA, and Three Arrows Capital’s (3AC) misuse of leverage and client funds each hit asset prices in the crypto market. Bitcoin is the biggest asset in the sector based on market capitalization, and historically, altcoin prices tend to proceed in the same direction as BTC.
As the LNUA and Terra ecosystem fell apart, multiple liquidations in Terra caused the price of Bitcoin to drop sharply, and investor confidence dropped. The same thing happened when Voyager, 3AC, and Celsius failed on a much larger scale. As a result, they lost tens of billions of dollars in investor and protocol funds.
Selling Pressures In 2022-Why is Crypto Down Today?
Some investors in cryptocurrencies like Bitcoin and others have said. That they could be used to protect against inflation in the digital age. But the way cryptocurrencies’ prices move shows that the market doesn’t seem to see these very volatile assets as safe places to keep money during times of economic uncertainty.
As institutional and retail investors have become more interested in cryptocurrencies. As a way to invest, cryptocurrencies have started to move more in line with the rest of the markets. Even though cryptocurrencies are usually a riskier type of asset.
Investors are looking for a place to hide from the bad effects of the Fed’s tightening of money. But they aren’t looking in the cryptocurrency market.
What To Expect In The Remaining Months Of 2022 And 2023
Prices in the crypto market are falling because of Federal Reserve policy. This means that the Fed’s ability to raise, pause, or lower interest rates will continue to directly affect the prices of Bitcoin, Ethereum, and other cryptocurrencies.
In the meantime, investors are likely less willing to take risks. Possible crypto traders might want to wait until. There are signs that U.S. inflation has reached its peak. The Federal Reserve starts talking in a way that suggests a policy shift.