The cryptocurrency markets, which were moving positively this year and filled crypto investors with hope suddenly tanked this week as the flagship coins: Bitcoin and Ethereum tanked over 4% in a single day!

At the end of 2021, interest in cryptocurrencies was at an all-time high. People were jumping into the crypto market to get a piece of the surging market as Bitcoin touched its lifetime high of around $67,000! Ethereum saw similar movement during the period as it breached the $4,800 mark.

Although the crypto markets had significantly declined by the end of 2021, the outlook was optimistic as people anticipated the need to rebound when bulls were in charge. However, bulls didn’t take charge as massive declines began as soon as 2022 began.

Even though cryptocurrencies were once called “Digital Gold”, they are baseless. These assets are, at the end of the day, completely dependent on the forces of demand and supply. Other assets, such as equity, have prices based on a productive asset, so a base value can be determined. However, cryptocurrencies have no base value so their prices are determined purely by the market’s demand and supply.

January 2022 was the beginning of a massive 6-month-long sell-off. The price of Ethereum tanked by 29% to decline below the $3,000 mark as Bitcoin registered similar declines and fell below the $40,000 mark. However, in spite of the Russian invasion of Ukraine, cryptocurrency prices remained relatively stable.

The stability in prices lasted till early April 2022. Bitcoin and Ethereum were trading around $42,200 and $3,200 respectively. The stability broke down as volatility improved in the crypto markets and inflation surged as their prices kept plunging without breaks. Bitcoin and Ethereum were down 19% in April alone!

Once May began, a string of events unfolded in succession as the prices of all cryptocurrencies were in freefall. First was the fall of TerraUSD, a stablecoin and its company, which was de-pegged from the dollar as it tanked from $1 to 35 cents. Market sentiment was adverse as investors began clearing their holdings, resulting in a 16% crash in May.

This was followed by the bankruptcy of Three Arrows Capital, a prominent name in the crypto hedge fund scene. The fall of TerraUSD and Luna forced the firm to file for bankruptcy. Next was the decline of crypto broker Voyager Digital. This publicly listed broker was the largest broker of Three Arrows Capital. Within 5 days of Three Arrows’ bankruptcy, Voyager Digital also filed for bankruptcy.

In July 2022, Crypto lender Celsius also filed for bankruptcy which tanked cryptos even further as market volatility was at its highest. Investors were fearing further declines as they chose to book losses and exit the market.

Amidst all of this, FTX came to the aid of struggling crypto firms. Ironically, FTX fell in November as the company’s fall resulted in the biggest decline ever: down 20+% in 4 days!! As a result, Bitcoin was down 64.23% in 2022!!!

 

What is the future outlook of the Crypto market??

In 2023, the cryptocurrency markets have surged 40% as several factors have assisted the tokens to rise. Inflation has been cooling down as further rate hikes appear unlikely. This has piqued the interest of investors once again as large buyers, termed ‘whales’, appear to have taken an interest in the crypto market once again.

However, the steam seems to have settled down as the cryptos have started declining once again. The spike which continued till the third week of February 2023 was interrupted as the candles began pointing downwards once again. A few days ago, Bitcoin and Ethereum registered a decline of over 4% in a single day!

This decline was on account of an announcement made by crypto-friendly bank Silvergate. Silvergate is one of the most significant US Banks and caters to several major clients such as FTX and Coinbase. This bank announced that it won't be able to file its annual reports and may not be able to operate for another 12 months!!

Technically, the chart of Bitcoin shown above shows that the token is currently in an uptrend and, despite the correction, is still above the longer trend line. The token is trading below its 5,20 and 50-day averages but well above its 100 and 200-day averages. Should buying resume, the token could move to challenge its immediate resistance at $23,347.15 (marked in blue). However, if bulls continue to dominate the token, it could retest the immediate support at $21,609.57 (marked in yellow).

RSI is near the 44 level i.e. neither overbought nor oversold.

In 2023, experts have suggested that the fight to implement regulations on crypto might see its end as several major economies try to regulate the deregulated sector for a variety of reasons, the most popular being the use of cryptocurrencies for terror funding.

Moreover, an expert has suggested that most meme coins could disappear. However, interest in digital assets is expected to rise- cryptocurrencies, NFTs, etc. More and more people are expected to take a greater interest in digital assets but cryptocurrencies may not be the ones benefitting from it. India and China are among the few countries that have already launched their own digital currencies as several other countries are planning to do the same.

Therefore, interest in digital assets might be booming, but cryptocurrencies may not gain from such rising interest.