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FX.co ★ Crypto analysts predict severe crypto winter

Crypto analysts predict severe crypto winter

On Tuesday, Bitcoin rose by 0.1% closing at $31,000. At the time of writing, the main digital asset is hovering at $30,511.

On Monday, the flagship cryptocurrency sank by nearly 10%, falling to the 2021 summer lows, and closed the day near $31,000 amid a decline in US stock markets due to fears over the possible tightening of the Fed's policy.

On Tuesday, leading altcoins followed BTC's growth. In the past 24 hours, Ethereum increased by 1.5%.

According to CoinGecko, the world's largest aggregator of data on virtual assets, the total capitalization of the crypto market rose by 0.7% to $1.50 trillion over the past 24 hours. At the same time, the cryptocurrency indicator of fear and greed gained 2 points and rose to 12, remaining in the extreme fear territory.

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Crypto analysts predict severe crypto winter

By the way, even a slight increase in BTC was a positive sign for investors yesterday, because the first cryptocurrency has been showing a strong downtrend for five days in a row, during this period, the value of the asset fell by 22%.

Factors influencing crypto market

The rebound in key US stock indicators was the main driver behind the previous day's rise in the value of leading digital assets.

Analysts began to emphasize the high level of correlation between the stock market and virtual assets against the background of tense expectations of both markets of the consequences of the geopolitical conflict in eastern Europe and the further steps of the US Fed.

We can cite the April trading results of the flagships of both markets as evidence of a parallel decline in the value of cryptocurrencies and stocks. Thus, in the past month, the high-tech indicator NASDAQ Composite lost more than 12%, which was the biggest decline since 2008.

At the same time, the value of Bitcoin dropped by 16.2% to the lowest level in April since 2011.

Such a high correlation of Bitcoin with the NASDAQ index makes investors increasingly doubt the cryptocurrency's ability to become a means of protection against inflation.

Earlier, experts of investment company Arcane Research have already stated that the correlation between BTC and securities of the tech sector has reached the highest level since July 2020.

Investor panic

In November 2021, BTC reached an all-time high soaring above $69,000. Since then, the asset has steadily declined and has lost about 55% of its gain.According to Glassnode, about 40% of Bitcoin holders are now below the level of their investments, i.e., they are at a loss.

In confirmation of the dismal situation of investors in digital assets, cryptocurrency investment company Galaxy Digital reported a net loss of $111.7 million for the first quarter of 2022. CEO of the company Mike Novogratz is confident in the further decline of Bitcoin in the background of the permanently plummeting US stock indices.

What's on the positive side?

Despite the steady drop in Bitcoin's price, there was a spectacular $45 million inflow of institutional investors into cryptocurrency funds last week after a month of constant capital withdrawals.

Katie Wood, a founder of investment firm ARK Invest, recently said that the bearish trend in the cryptocurrency market would reverse soon. In addition, Wood predicted a decline in the correlation between cryptocurrency and the NASDAQ Composite stock index, calling it temporary.

El Salvador also hastened to take advantage of the tangible drop in Bitcoin's price. Against the backdrop of the observed decline in the crypto market, the country's government bought 500 BTCs at a price of $30,744. In the fall of 2021, El Salvador accepted Bitcoin as a legal means of payment.

Analyst predictions

As for the possible scenarios regarding the future of Bitcoin, crypto analysts have recently released mixed predictions.

Earlier, experts from Bloomberg predicted the resumption of growth of the flagship cryptocurrency. Analysts believe that the rapid correction in world stock markets will force the US Federal Reserve to reduce the pace of monetary policy tightening. In response, high-risk asset markets, including the cryptocurrency one, will begin a tangible bullish rally. In addition to a significant increase in the value of Bitcoin, Bloomberg also assumes the resumption of growth of popular virtual assets such as Ethereum and Solana.

Meanwhile, Cardano founder and Ethereum co-founder Charles Hoskinson said that a new cryptowinter has begun in the digital asset market. The American entrepreneur believes that to date there is not a single powerful factor that can cause an upward rebound in the market.

Economist Benjamin Cowan is of the opposite opinion and says that cryptocurrency will soon see a spectacular rise. Interestingly, this time in his forecast, the crypto expert ignored Bitcoin and advised traders to invest in Cardano, Avalanche, and Polkadot.

However, popular Bitcoin critic Peter Schiff predicts the fall of the first cryptocurrency to $10,000. The main condition for this may be a sharp breakthrough of $30,000, Schiff believes.

As history shows, May is considered quite a good month for Bitcoin. Thus, over the past 11 years, BTC has closed the month with an increase in seven cases and a drop in four. The average rise in May is about 27%, while the decline is 6%. If this May the first cryptocurrency decides to repeat the approximate gains of the past years, it can grow up to $48,000 or collapse to $32,000 in a month.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade
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