Why is the crypto market down today? – Crypto

bitcoin (BTC) price is struggling to hold onto a marginal gain of 0.23% on Oct. 20, but generally crypto prices are falling across the board and the broader market remains in a strong downtrend. Bitcoin price continues to trade below $20,000, a level that many investors view as a psychologically significant support and resistance level.

Concern over the US Federal Reserve’s “lack of progress” in tackling high inflation is the likely reason for the long-running malaise seen in crypto prices. On October 20, Philadelphia Federal Reserve Chairman Patrick Harker suggested that higher interest rates have not been effective in curbing inflation, concluding that “we’re going to keep raising rates for some time to come”.

Many analysts believe that the Fed’s aggressive rate hikes represent another policy mistake – the first being waiting too long to deal with rising inflation – and that 2023 will see the onset of a deep recession. .

The Consumer Price Index (CPI) for September showed that consumer prices rose 0.4%. Compared to a year ago, consumer prices are now 8.2% higher, according to data from the Bureau of Labor Statistics.

In addition to a 0.4% increase in consumer prices, the core CPI has risen 0.6% month-over-month since September and 6.6% over the past 12 months, when food and energy prices are excluded.

In short, rising inflation is the last thing the Federal Reserve wants to see. The Fed’s rate hikes are aimed at calming the economy and reining in high inflation, so the October 13 higher-than-expected report should result in another round of 0.75 basis point hikes in the coming months.

Given the strong correlation between the crypto and equity markets, Bitcoin’s price action tends to follow the direction of the S&P 500 and the Dow, and a number of economic events that occurred in mid-October could continue to put pressure on crypto prices.

The following dates highlight important economic events that impact investor sentiment in the crypto market:

  • Oct. 17 – end of month: 3rd quarter results
  • Oct. 28: Personal Consumption Expenditure (PCE) Price Index

This week, a number of major US corporations are releasing quarterly results and the mixed bag of results is causing volatility in stock markets. Tesla (TSLA) stock fell 6.2% after its third-quarter profit target was missed, with the electric vehicle maker citing production and delivery issues.

In addition to these upcoming events, the strength of the US dollar and what appears to be a severe escalation in the conflict between Ukraine and Russia continue to weigh on all markets.

Let’s take a closer look at three reasons why crypto prices continue to fall in 2022.

Federal Reserve interest rate hike

Rising interest rates increase the cost of borrowing money for consumers and businesses. This has the effect of increasing business operating costs, costs of goods and services, production costs, wages, and ultimately the cost of almost everything.

High and out of control inflation is the main reason the US Federal Reserve is raising interest rates. And since the rate hikes began in March 2022, Bitcoin and the broader crypto market have undergone a correction.

When monetary policy or measures that measure the strength of the economy change, risky assets tend to signal, or move, earlier than actions. In 2021, the Fed started signaling its intention to eventually raise interest rates, and data shows that the price of Bitcoin corrects sharply by December 2021. In a way, Bitcoin and Ethereum were the coal mine canaries that signaled what awaited the stock markets.

If inflation begins to decline, the health of the economy improves, or the Fed begins to signal a pivot in its current monetary policy, risky assets like Bitcoin and altcoins could once again be the “canaries.” in the coal mine” reflecting the return of risk -on investor sentiment.

The Persistent Threat of Regulation

The cryptocurrency industry and regulators have a long history of not getting along due to various misconceptions or distrust of the real use case for digital assets. Without a framework for regulating the crypto sector, different countries and states have a plethora of conflicting policies on how cryptocurrencies are classified as assets and precisely what constitutes a legal payment system.

The lack of clarity on this issue is weighing on growth and innovation within the industry, and many analysts believe that the integration of cryptocurrencies cannot occur until a more universally agreed and understood set of laws is enacted. .

Risky assets are heavily impacted by investor sentiment, and this trend extends to Bitcoin and altcoins. To this day, the threat of hostile cryptocurrency regulations or, in the worst case scenario, an outright ban continues to impact crypto prices on an almost monthly basis.

Scams and Ponzis have sparked liquidations and repeated blows to investor confidence

Scams, Ponzi schemes and high market volatility have also played a significant role in the fall in crypto prices throughout 2022. Bad news and events that compromise market liquidity tend to lead to catastrophic results due to lack of regulation, youth of the cryptocurrency industry and market. being relatively weak compared to equity markets.

The implosion of Terra LUNA and Celsius Network as well as the misuse of leverage and client funds by Three Arrows Capital (3AC) have each been responsible for successive blows to asset prices in the crypto market. Bitcoin is currently the largest asset by market capitalization in the industry, and historically altcoin prices tend to follow direction the BTC price is going.

As the Terra and LUNA ecosystem crumbled in on itself, the price of Bitcoin corrected sharply due to multiple selloffs occurring within Terra – and investor sentiment plummeted.

The same thing happened on an even greater scale when Voyager, 3AC and Celsius collapsed, wiping out tens of billions of investor funds and protocols.

Related: Here’s What Could Trigger a “Huge BTC Rally” as Bitcoin Clings to $19,000

What to expect for the rest of 2022 to 2023

Factors impacting price declines in the crypto market are driven by Federal Reserve policy, which means the Fed’s power to raise, suspend, or cut rates will continue to have a direct impact on the price of Bitcoin, the price of ETH and the price of altcoin.

In the meantime, investors’ risk appetite should remain subdued, and would-be crypto traders might consider waiting for signs that US inflation has peaked and the Federal Reserve is starting to use language. indicating a political pivot.

In short, rising inflation is the last thing the Federal Reserve wants to see. The Fed’s rate hikes are aimed at calming the economy and reining in high inflation, so the October 13 higher-than-expected report should result in another round of 0.75 basis point hikes in the coming months.

Source: https://dwpills.com/why-is-the-crypto-market-down-today/

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