Never in the course of history has Bitcoin experienced such sustained losses in the market as it has over the past seven weeks.
Bitcoin’s losses do not stop
Bitcoin has been suffering losses for seven consecutive weeks, in a very negative market phase even in traditional financial markets. This is the longest negative period since the digital currency appeared.
The price of Bitcoin has returned to the levels of January 2021 in just a few weeks, after it had reached its all-time high of over $69,000 in November.
The market’s most capitalized currency is struggling to climb back above the $30,000 barrier, lost after a week of record slumps due to the implosion of the Terra project (LUNA) and its UST stablecoin, which dragged the entire crypto market with it, with losses of more than double digits for all major stocks.
In mid-March, Bitcoin had its last week of robust rises, recovering to $47,000. From there began the descent that seems not to have found a landing point yet. From this price level, according to some analysts, there could be a rebound or a sudden descent in the coming days.
This for me is the best case scenario on #Bitcoin due to the rejection and 3 wave confirmation. We either drop to new lows from here, or we complete the C wave flat then pump once more
If your a scalper this will be heaven for you over the next few days pic.twitter.com/LNvVbpXPG6
— Crypto Tony (@CryptoTony__) May 16, 2022
Some analysts, examining the certainly not favourable economic situation, seem to be decidedly pessimistic about Bitcoin and the cryptocurrency market in general.
Alex Kuptsikevich, market analyst at FxProha, argues that:
“In our view, the cryptocurrency downtrend remains unaffected. Adding to the downside is the negative outlook for US monetary policy, where there is still no light at the end of the tunnel in terms of interest rate hikes”.
Positive correlation between Bitcoin and traditional financial markets
What now seems to be confirmed is that there is now an increasingly close correlation between the performance of Bitcoin and that of the Nasdaq, the market for US technology stocks. Last week, when the Nasdaq broke the 12,000-point barrier, Bitcoin went close to $24,000, at the same time as the collapse of assets related to the Terra ecosystem.
Concerns about inflation, as well as the Fed’s moves that could further raise rates, are keeping investors away from risky assets such as Bitcoin. In late April, analysts at Goldman Sachs argued that the Fed’s aggressive policy to keep inflation in check could lead to a new recession.
According to other analysts, however, this strongly bearish market phase could draw the interest of institutional investors to Bitcoin. This is certainly the view of Michael J. Saylor, CEO of MicroStrategy, the fund with the largest exposure to BTC in the world, who a few days ago reiterated that Bitcoin is the best anti-inflation tool and that it is therefore extremely convenient to buy it right now.
Ki Young Ju, CEO of analytics platform CryptoQuant, at the same time wanted to highlight the fact that at such low prices, Bitcoin could become attractive to institutional investors, stating:
“If you look at the heatmap of Coinbase’s BTC-USD order book, you can see rather thick bid walls since the last bearish market in May 2021”.
The situation remains very uncertain and the risks of investing in cryptocurrencies are still very high. Looking at the Fear & Greed Index, which measures market sentiment, it has been stable for days in the “extreme fear” zone around the 14-16/100 level.