“Like Getting Off Heroin”: How Bad Will This Bitcoin Bear Market Get? – Tech Tribune France

In short

  • Cryptocurrencies have been closely correlated to US stocks.
  • Prices should continue to fall.

Crypto Winter is no longer coming, it’s here. A bear market. But how much worse will it get and for how long? Well, according to analysts who spoke to DecryptThe worst is yet to come.

The real problem now is inflation, which is booming in the United States (and everywhere else), and which the Federal Reserve wants to control by raising interest rates.

Last week, the central bank increase rate of 0.75%, the biggest increase since 1994. Fed officials added that further increases are likely to come later this year. Higher interest rates make it harder to borrow money, which means fewer investors are willing to bet on assets with perceived higher risk, such as stocks or cryptocurrencies.

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Bitcoin, seen by many as “risky,” is plunging alongside stocks. Right now, the largest cryptocurrency by market capitalization is trading for $20,333.59, according to CoinMarketCap. The current correlation with traditional markets is what differentiates this crypto bear market from the crash of 2018.

Bloomberg Intelligence analyst Eric Balchunas said Decrypt that the Federal Reserve would be less likely to step in and lower interest rates – as it has done in the past – to help if things go wrong.

“The reason it’s different is that the Fed is serious this time,” Balchunas said.. “In every past sell-off, there was this thought behind it that the Fed would step in if the market really needed it, and this time it won’t.

“And the reason for that is inflation, that’s a major issue in the election. Normally they [the Fed] care, but they have a bigger problem and that’s the quagmire. Markets are going to have to learn to live without the Fed, and that’s going to be painful. It’s like without heroin, the first year will be hard.

Ouch. Want numbers? Scott Norris, co-founder of US-based private bitcoin miner LSJ Ops, said he believes Bitcoin could drop further to $11,000. Over the weekend he Has fallen below $20,000, an important support level, down more than 70% from its November all-time high.

“The Fed has been extremely slow to act on inflation or even fully acknowledge its existence,” he said. “A lot of adults have never experienced a bank run before, and now it’s happening first in crypto and stocks.

“The peak pain is coming, but it hasn’t hit yet – this time around the world’s governments aren’t handing out bailouts, just bills, as they maintain their own spending levels. The United States could avoid recession altogether and plunge headlong into a depression. »

Julio Moreno, senior macro on-chain analyst at CryptoQuant, an analytics firm, was slightly less pessimistic, recounting Decrypt in an interview that Bitcoin could drop to around $16,000.

“In March 2020, he [the crash] didn’t last long because the Fed provided liquidity aggressively due to the pandemic,” Moreno added. “This time he is doing the exact opposite.”

The Fed is likely to remain hawkish through 2022, pushing asset prices even lower, trader and analyst Alex Kruger says Decrypt. He added that the S&P could bottom out in the second half of the year, around 10-15% below current levels, with Bitcoin following that the same way.

“It’s all about inflation and the Fed, even for crypto,” Kruger added.

And when it comes to Ethereum, the second-largest digital asset by market capitalization, and which has helped make crypto more mainstream as the digital fuel that powers NFTs, things aren’t much better. (As of this writing, it has bounced back a bit, to just over $1,100.)

Lucas Outumuro, head of research at IntoTheBlock, said Decrypt that although Bitcoin and Ethereum operate differently from traditional tech companies, they operate like said tech stocks “likely due to the intersection between the types of investors holding these assets.”

“I expect these conditions to continue to push prices down until the macroeconomic uncertainty subsides,” he added.

During the last Crypto Winter, in 2017, Bitcoin fell from $19,497 on December 15 to $13,831 six days later. The pain didn’t end there: throughout 2018, it continued to dive, until, exactly one year later, it was worth less than $3,300.

This Crypto Winter, Analysts Said Decryptcould be even colder, even longer.

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