As the crypto crisis worsens, it feels like traders are having a one-sided trade on Bitcoin. The bitcoin market value hit new lows as the crypto market saw its worst performance since June 2022. As per CoinMarketCap, the global crypto market fell below the $1 trillion mark for the first time in June.
From an all-time high of almost $69,000 in November, Bitcoin’s fall has been sharp and steep. Currently, it is trading below $24,000 and trying to keep its head above the $21,000 mark. The crypto downfall came about when inflation data revealed that the consumer price index was showing an 8.6% year-over-year increase in May.
Investors have been spooked by rising inflation, resulting in a huge market sell off. Investment sentiment is swamped by fear after Celsius, a crypto lending platform, paused all withdrawals, swaps, and transfers. Celsius’s token, CEL, bore the brunt of its decision as CEL tanked by nearly 50% after the news was released.
During the pandemic, many individuals bought digital currencies or high stakes in funds that dealt with these assets. As the market implodes with rising inflation and falling stock prices, investors are trying to minimize risk by selling off their digital holdings.
The Crypto Downfall
In mid-June, Bitcoin dropped below $18,000, setting off panic selling. Marcus Sotiriou, market analyst at GlobalBlock, a digital asset broker, told Time that bitcoin’s abysmal performance could signal a bearish market. “This is because it would be the first time that this level has been broken on a long-time frame and could suggest an extended bear market is on the horizon.” The world’s most popular crypto hovered between $17,000 and $21,000 throughout June.
When Celsius put a freeze on crypto transactions, citing “extreme market conditions,” the market witnessed an enormous sell-off that plunged the prices of crypto across the board. The company justified its decision by stating, “We are taking this necessary action… to stabilize liquidity and operations while we take steps to preserve and protect assets.”
The crypto market appears to be linked to the equity market. In 2022, the crypto market mirrored the falls of Wall Street and, as an aggressive rise in interest rates is seen as an indicator of recession, bitcoin holdings have suffered. The unexpectedly steep fall of Terra (LUNC-USD) aggravated matters, leading to the worst sentiment in the crypto market. The crypto fear and greed index is currently at 18 out of 100, which has been categorized as extreme fear. A market driven by fear tends to be extremely volatile. Studies show that the market is saturated with extreme greed and fear, and bitcoin miners are busy selling their stock.
As the market prepares for a long winter, Bitcoin mining companies are looking towards blockchain avenues to ride out the storm. As electricity is the main component of bitcoin mining, companies with low power costs will be able to better manage the bearish outlook. Experts say the crypto market has followed the stock market as macroeconomic factors intertwine their fates. The Bitcoin one sided trade is a result of surging inflation, a lagging recovery in the job market, and the Fed’s attempts to keep inflation in check by raising interest rates.
Most experts advise against betting everything you have in the crypto market given its volatile nature. The current market conditions have only made it worse as bitcoin one side trade gains momentum. Traders state that buyers must be cautious, especially in this financial climate, as one has a high chance of losing it all, but a very small chance of winning it big.
