Relevance up to 14:00 2022-01-25 UTC+00
The cryptocurrency market continues its downtrend, causing the market cap to decline to $1.5 trillion. Market participants have different perceptions of the current situation, but most are confident that a bear market has been established. Therefore, most institutional investors and crypto-influencers are waiting for the situation to unfold.
However, Bitcoin supporters and the cryptocurrency market continue to remain calm. MicroStrategy head Michael Saylor said that the current bitcoin decline is a great opportunity to average the price, which may bring in more revenue in the future. His opinion coincides with the Salvadoran government’s one, which bought 410 BTC during the collapse. The South American country bought BTC at an average price of around $47,000 and therefore it is suffering losses. Saylor is still in the black, as he purchased the cryptocurrency at an average price of around $31,000. However, if the market situation does not normalize, MicroStrategy may also be at a loss.
According to Bloomberg, the US administration will have at its disposal a strategy to regulate the cryptocurrency industry in February. Given the discontent of US investors, the establishment of these regulations for transactions with cryptocurrencies is likely to have a positive impact on the market. First of all, it may lead to the popularization of cryptocurrencies among the country’s citizens, as well as establish the authority of the SEC, which at its own discretion approves and bans ETFs.
A local correction in the cryptocurrency market could prove beneficial to governments, which use the investor respite to establish clear rules for controlling the digital industry. At the same time, it is too early to talk about the beginning of a bear market for crypto-assets. The year 2022 began with a crisis in all stock markets. For example, the NASDAQ index fell by 13% in January and the S&P500 dropped by 9%. This crisis should be seen as the market recovering from the oversaturation of money that supported the economy in 2021. The Fed’s announcement that it was winding down its stimulus program was a prerequisite for the imminent full-scale decline of the stock markets.
The correction of the crypto market is approaching its conclusion. The main indicator of it is Bitcoin, which fell by 50% from the all-time high. A similar situation occurred in April 2021, so in the nearest future I assume the price is likely to decrease to the area of $30,000-$32,000. Subsequently, the price may rebound and a sideways movement or a recovery may begin. The altcoin market will also follow Bitcoin. At the same time, the cryptocurrency market needs to adapt to the new realities, as the world governments are tightening regulation of digital assets. In addition, the Fed’s policy is aimed at reducing the rate of inflation, and therefore a powerful bull rally in crypto should not be expected. The level of $75,000 per BTC looks like the most probable scenario in 2022.
With all the optimism and belief in a bright future, one cannot rule out the possibility of the beginning of a bear market. Bitcoin’s fall exceeds the boldest expectations and, therefore, the 50% correction may continue and turn into 80%. In that case, we will be talking about a crypto winter on a large scale. As of January 24, the market’s negative reaction to the correction is excessive and does not correspond to the real state of affairs in the market. Current positions should be used for additional investing, averaging positions and portfolio diversification. The final point of correction for Bitcoin may be the level of the previous local bottom located at $29,800, where there was a rebound and movement to the high at $64,700. If the price breaks through this level and fixes below it, the crypto winter may be canceled.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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