Why some believe the crypto market is crashing

There are several people who believe that a new crash in the crypto market has not yet occurred. 

However, it is hard to imagine why this assumption is made. 

The current capitalization of the entire crypto market is over $1.2 trillion, which is a value never reached before February 2021, about two years ago. 

Although many cryptocurrencies were born after 2017, the crypto markets have actually existed since 2010, and during the peak of the same 2017, they reached a high of about 850 billion. 

2017 was the year of the second post-halving bubble, and 2021 was the year of the third post-halving bubble. 

While it is true that the current capitalization is 60 percent lower than the absolute all-time high of over $3 trillion in November 2021, it is 46 percent higher than the annual low of $830 billion in 2022. 

So if it was clear in 2022 that the crypto market was crashing, it should also be clear that the crash stopped last November, and no real crash has been in sight since then.

Crypto crashing: the remaining problems

The fact is that there are still many problems, especially in the global financial markets, that lead some to believe that the crash is about to start again. 

The two main problems seem to be the risk of a recession by the end of the year and the still restrictive monetary policies of the central banks. These are problems that are particularly related to the US economy. 

It has to be said, however, that inflation is coming down a lot, and this may lead the Fed to ease its restrictive monetary policy by the end of the year. It will probably remain restrictive, but a little less onerous for the economy.

In fact, one of the possible main causes of the recession is precisely overly restrictive monetary policy, and since it will easily remain so for the rest of 2023, there are many who argue that a recession is now inevitable.

However, if the recession is as mild as the U.S. authorities claim, and the Fed loosens its monetary policy a bit, a financial market crash could be averted.

Outlook for Bitcoin and Crypto

According to eToro market analyst Simone Pietro, although the price of bitcoin has fallen from its recent high of over $30,000, it would still be in a sort of winning streak if you look at its long-term trend. 

In fact, the fact that it has been rising for about four consecutive months is generally considered a positive pattern for a possible new bull run.

So far, 2023 has been a very different year from 2022, and perhaps some people have not noticed. 

Peter says that while Bitcoin suffered losses last year in conjunction with economic concerns and withdrawals from global investment markets, in 2023 it would become something of a rallying point for investors, so much so that it seems to be living up to its definition as “digital gold” for now. 

So while there are those who believe that another crash is imminent, there are analysts who suggest that the crypto market is not having a bad time at all right now. 

For that matter, if the broad similarities to 2019 continue, the price of bitcoin could even climb back up to $35,000 or even $40,000 by the end of the first half of the year.

Good news and positive sentiment

In addition to the bad news, mostly from the traditional financial markets, there is also some good news. 

For example, the famous auction house Sotheby‘s made its debut in the NFT market by launching its official marketplace “Sotheby’s Metaverse”. 

Other positive news for the crypto sector was the launch of a dedicated digital money market fund by Franklin Templeton. 

This is a Polygon-based on-chain money market fund with $270 million in assets. 

This good news also comes with a different tone. In fact, HMRC has launched a consultation on DeFi and staking services in an attempt to change the tax treatment of the sector. 

While greater regulatory clarity could be welcomed by the UK crypto community, the impact of any new regulation in this regard could have some downsides. 

The fact remains, however, that there is currently no news specific to the crypto market that would suggest an imminent crash. 

However, it remains to be seen whether serious problems in the traditional markets could trigger a crash for reasons outside of the crypto sector.