Source: PaxForex Premium Analytics Portal, Fundamental Insight
Crypto investors woke up yesterday morning to more bad news after a rough weekend for the industry. Bitcoin fell below $23,000, down more than 18% in 24 hours and nearly 25% in the past seven days, according to CoinGecko. Other altcoins fell even more, with Ethereum (ETH) and Solana (SOL) falling more than 30% in the past week.
Bitcoin has held around the $29,000 to $30,000 mark over the past month, so yesterday's drop marked a significant downside reversal. Indeed, it more than wiped out all of last year's gains. The leading cryptocurrency is now at an 18-month low, and many analysts fear it could fall even further.
The main reasons for the sharp drop in cryptocurrency prices, which are becoming commonplace for crypto investors, are broader economic conditions and concerns about the instability of decentralized finance.
- Inflation continues to rise
The latest Consumer Price Index (CPI) data showed that inflation increased rather than decreased as various authorities had expected. The Consumer Price Index rose 8.6% year-over-year for May, raising fears that the Federal Reserve will have to take even more drastic measures to rein in inflation.
Last month the Fed raised rates by 0.50%, the largest rate hike since 2000. Some economists now fear that the Fed may prefer to raise rates by 0.75% after this week's meeting. The Fed's economic tightening measures have been one of the main factors affecting cryptocurrencies this year. Both stocks and cryptocurrency prices have been hurt by rising interest rates and recession fears.
- Celsius suspends withdrawals
Popular deficit creditor Celsius announced that it is suspending all withdrawals from its platform. Celsius said it was doing so because of "extreme market conditions." In its blog, the company stated: "We are taking this action today to put Celsius in a better position to meet its withdrawal obligations over time."
The company said funds on the platform would continue to accrue interest and that its focus was on protecting assets. However, given that the Terra (LUNA) collapse is still fresh in investors' minds, it is not surprising that the announcement caused additional uncertainty and undermined investor confidence.
There were times last year when it seemed like cryptocurrency prices could only move in one direction. Investors piled into the market, fearing they would miss the next scoop and push prices up. Unfortunately, we are in a very different economic climate right now, and it is unclear what will happen next.
Some investors may see bitcoin at $23,000 as a bargain, especially if they believe it can return to its November high of $68,000. Indeed, Ark Invest predicts that bitcoin's price could reach $1 million by 2030. However, there is no guarantee that it will return to previous highs or set new records. Over the next 10 or 20 years, bitcoin could do well, but it could also completely collapse.
There are several factors that could push bitcoin down even more in the near term. In addition to market concerns about the rising cost of living and a potential recession, the impact of increased regulation must also be considered. We don't know exactly what form it will take, but we do know that regulatory changes are coming and will affect the entire industry.
Another thing to consider when deciding to buy bitcoin is how well you are doing with your other financial goals. For example, if your emergency fund isn't yet big enough to cover your living expenses for three to six months, or if you're falling behind on your retirement savings, those goals should be a priority. Focus on financial fundamentals that will help you build long-term wealth before spending money on high-risk assets like cryptocurrencies.
Buying bitcoin at a discount only makes sense if you believe in the long-term potential of cryptocurrencies and your finances are fine. Make sure you understand the risks and only invest money you can afford to lose. The ideal is to position yourself to benefit if the crypto industry takes off again and not face financial ruin if it drops to zero.
As long as the price is below 32700.00, follow the recommendations below:
- Time frame: D1
- Recommendation: Short position
- Entry point: 22547.00
- Take Profit 1: 19000.00
- Take profit 2: 15000.00
Alternative scenario:
If the level of 32700.00 is broken-out, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 32700.00
- Take Profit 1: 39500.00
- Take Profit 2: 45600.00
