The bitcoin exchange rate decreased by 70% relative to the historical maximum of $ 69 thousand in November 2021. In 2022, the value of the first cryptocurrency reached a maximum of 47.5 thousand USD at the end of March and has since dropped to current values in the region of 20 thousand USD. Experts named the reasons for the decline in prices on the cryptocurrency market and told when a trend reversal could occur.
Few people are willing to take risks now, and the reason for this is the rise in the cost of funding after the Fed rate hike, according to Chen Limin, financial director and head of the ICB Fund's trading operations department. In his opinion, the situation may be aggravated by a possible downturn in the American economy and turbulence in the commodity markets.
The expert believes that most likely the current bear market will be delayed: the growth of the capitalization of cryptocurrencies may not begin until 2024, and before that the market will need to undergo "self-purification from the most unstable projects." Due to the fall in quotations, some institutional investors and creditors have already faced problems, but their troubles will not end there, Limin believes.
In his opinion, bitcoin quotes are "looking towards" 10 thousand USD, but lower values are also possible. The level of 20 thousand USD was not easy to break through — a pause was needed for full-fledged care below, but everything is going to an early victory of sellers over buyers, the analyst believes.
According to the expert, now the reason that initially contributed to the growth of the market — purchases by institutional investors — has become the main driver of the fall: we are talking about purchases by institutional investors. When the Fed decided to raise the rate, funds and creditors left the risky cryptocurrency market to free up funds to maintain more important positions, the expert said.
Another rally will require the return of capital back to the sector, and this will happen only after the Fed decides to stimulate market activity again, and this is still very far away, Limin is sure. He added that the agency will certainly want to make sure that inflation is completely defeated and only after that it will begin to soften monetary policy again.
This week, important events will be the release of statistics on consumer prices and producer prices in the United States, said Artem Deev, head of the analytical department of AMarkets. According to him, their growth is likely to lead to a new round of pessimism on the platforms, which will contribute to the fall of stock market indices and the cryptocurrency market. Bitcoin by the end of the week may again go below the 20 thousand USD mark, the analyst believes.
The expert also noted that today there is a new negative factor on the sites: the situation in China, where the largest developer Evergrande defaults.
The growing inflation in the US and the EU, the energy and sanctions confrontation between Western countries and Russia, the unstable economic situation in China with the prospect of recession, general expectations of a global crisis before the end of the year — this is a background that does not give chances for the growth of cryptocurrencies, Deev admitted.
The expert noted that for these reasons, it is not necessary to talk about a cardinal reversal or breaking of the trend. It is extremely difficult to say when this will happen, since the world economy is rapidly heading for a large-scale crisis, the analyst believes.
"Bottom is a process"
Now there is a significant outflow of bitcoin from exchanges, and this indicates that investors see a certain area of interest in this, and the withdrawal of assets means their transfer to long-term storage, the analyst said from EXMO.me Oleg Fedishin. He believes that this is one of the signals that the decline cycle is coming to an end.
"It can even be considered a certain leading signal, which indicates an imminent reversal. But it is possible to predict the bitcoin exchange rate only in the general context," the expert noted.
He explained that the increased distrust of exchanges, the blocking and restriction of exchange accounts: sanctions, security problems and other reasons encourage investors to withdraw assets from exchanges to a more secure place, for example, to cold wallets. This is already a very good signal for the crypto market, Fedishin believes.
He drew attention to the fact that since 2020, balances on exchanges have been systematically declining and are now at the level of 2018, but the number of non-zero balances is growing all the time. This fact signals that more and more people "accept and trust" bitcoin, the total number of users and wallets is increasing, the analyst says.
He pointed out that some whales have become more active since mid-June, when the price of bitcoin went down to the 20 thousand USD zone, and smaller investors were active from the 30 thousand USD mark.
"The bottom is not a specific point on the chart. Bottom is a process. And in the global picture, the formation of this bottom may take weeks or months. But the fact that we have already approached it is a fact," admitted Fedishin.
The analyst believes it is likely that the easing of the Fed's policy will be able to positively motivate the markets: that is when the recovery period will begin, the expert is sure. According to his expectations, by the end of the year the Fed rate will be 3.23%-3.5%, and the improvement of the situation in the crypto market and the beginning of a new phase of growth is predicted by him already in the 4th quarter of this year.