The cryptocurrency market had a fatal week as the market capitalization of the entire market shed approximately 17% over the week. This represents a $270 billion decline which put the current market capitalization at $1.36 trillion from $1.63 trillion at the start of the previous week.
What caused the decline?
Bitcoin bulls, after crossing the $40,000 trading mark, failed to maintain their position over a series of events that occurred during the week. These events caused massive FUD (Fear Uncertainty and Doubt) in the market which caused the bears to take over, thereby instigating a massive sell-off over the weekend. These events are:
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- FOMC (Federal Open Market Committee) Report
The U.S Federal Reserve (FED) signalled at the end of its monthly FOMC meeting on Wednesday that it will raise interest rates at least twice by the end of 2023 to 0.6%. Out of 18 Fed officials, 11 forecast at least two quarter-point interest rate increases for 2023 which is a sign that the central bank has begun asset tapering discussions. This caused the dollar index to gain significantly, thereby pushing Bitcoin and the entire cryptocurrency space bearish.
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- The FUD around an incoming “Death Cross” on Bitcoin
The death-cross is defined by a cross of the 50-day exponential moving average (EMA) below the 200-day EMA. The cross happened on Friday and it propelled the sell-off the market saw over the weekend.
- Regulatory crackdown
Bitcoin has been weighed down by ongoing regulatory uncertainty and environmental concerns. On Thursday, miners in Ya’an, one of the major crypto mining hubs in China’s Sichuan province, received an inspection notice that required shut-downs. Friday, Wu Blockchain reported that Alibaba Cloud, China’s largest cloud service provider, made calls to cryptocurrency and mining companies registered in China regarding potential domain name cancellations due to regulatory requirements. This has also dragged down the entire cryptocurrency market.
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What they are saying
Mark Newton, the founder of Newton Advisors, stated, “The recent stabilization just isn’t sufficient to suggest buying dips. For those who are aggressive traders, any break of 30k should lead down to 20-25k and that should be a better area to consider buying dips for a bounce.”
What to expect
For the week, cryptocurrency investors should keep a close eye on Bitcoin and the $30,000 trading zone. This is a strong support zone in the market and any break below that zone will signal another massive sell-off, just like we say last month.
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