The cryptocurrency market continues to consolidate as most cryptos turn red after a greenish week. Bitcoin fell by more than 4% since last week, going back to the 19K price area. Ethereum also breached the price of $1.3K lower, confirming its current sideways trend. Why is crypto down today? Will cryptocurrencies go up ever again?
What’s Happening to Crypto
Since the month of July 2022, the crypto market started a promising uptrend. The anticipation for the Ethereum merge helped in hyping up prices for different cryptocurrencies. The market cap increased from $900 Billion and reach 1.2 Trillion. It reached its peak in mid-August 2022. However, after the merge happened, most retail traders trader and investors barely noticed any change in crypto prices. A selloff occurred, bringing back prices back lower. The current market cap is back at its previous $900 Billion valuation and even consolidating since mid-September 2022.
Why is Crypto Down 2022
The year 2022 was obviously a bearish year for cryptocurrencies. While there are signs of a comeback, they often only come after extensive consolidations. There are several reasons as to why cryptos went bearish in 2022:
First Reason:
The previous years of 2020 and 2021 saw a massive rise in crypto prices. The market cap of cryptocurrencies in USD back in the beginning of 2020 was around $250 Billion. It shot as high as 10 times to reach $2.5 Trillion towards the end of 2021. This price increase was not sustainable and needed a price breather. Everything that goes up, must go down. Not necessarily in a proportionate manner, but at least as part of price adjustments.
Second Reason:
Profit-taking is an integral activity for day traders, investors, and hedge funds. When taking profits, the user sells part of his position and liquidates his holdings. This creates an outflow of money from the crypto market, which is also a direct reason for sharp price decreases.
Third Reason:
Geopolitics also plays an important role in how people invest. In uncertain times, people often liquidate everything and keep cash with them. The rising tensions between Russia and the EU broke many markets worldwide. Imagine having crypto investments, but you need to run away from your house and take all your belongings with you with some cash for the unknown journey…your cryptos won’t do you any good right? Same thing if you were an investor anticipating bad upcoming macroeconomics, you’d directly liquidate.
Conclusion
When zooming out and seeing the bigger picture, you’d understand that the current bearish year is very normal. From a market cap of $250 Billion in 2020 to a current market cap of $920 Billion, the crypto market is definitely in good shape over the long term. The question remains, when will the crypto market go back to its uptrend? Well, the short answer is not next week.
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