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As unfortunate as it is, Bitcoin (BITCOMP) is not at the bottom yet. We are not about to see this crypto winter turn to spring. Friday saw one of the steepest selloffs in cryptocurrency history, with the industry‘s total market capitalization shrinking by 9.1% on a single day. The losses were led by bitcoin, which recorded a nearly 10% drop to just over $21,000, while ETH (ETH-X) couldn’t maintain “merge“ enthusiasm and shed nearly 11%. Prices have stabilized somewhat, however, investors should still keep their eye on the market because this is not yet secure.
Cryptocurrency is similar to wider markets in that what the Fed says scares investors. The US central bank has hinted that there will be no let-up in 75 basis point rate hikes in the near future. Inflation continues to be a problem in the US and abroad, with Germany - Europe's largest economy - recording some particularly frightening numbers in its producer prices inflation index last week. Although there are many reasons for inflation, particularly in Europe, what the Feds say matters. Even just talking about inflation can make inflation worse.
The charts are not looking much better. The infamous bear market “rising wedge breakdown” is predicting a 20% fall from here to potentially around $17,000 for bitcoin, while others are pointing to an overall market decline of 25% by around mid-September - when we might - but only might - see a bottom.
This is also not only about inflation or the charts. There is a negative view of cryptocurrency going around thanks to issues the crypto world is still ironing out. We’re facing sustained negative sentiment thanks to the collapse of centralized entities like Celsius (CEL-X), 3AC, and Voyager Digital (VYGVF), who have dragged cryptocurrency through the mud over the past couple of months.
Sadly we will not come out of any of this quickly. Rather, we as an industry are going to need to do a lot of work to repair the damage done since May of this year when UST crumbled, triggering a domino effect that we are still keenly feeling.
We will have to learn from the mistakes of the past, and use this time to build a better ecosystem that truly serves all of its participants - not just the wealthy ones who might be able to claw back a few million when things go bad.
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