After a scary correction this Saturday, with the Bitcoin price dropping to a low of $17.9k, the BTC price is recovering again, currently trading at $19.4k. Ethereum also recovered after dipping to $900, currently trading at $1k, up over 5% in the past 24 hours. The market saw a significant recovery after yesterday’s dump, which spells good news for next week’s price action.
Why Is Bitcoin and Ethereum Price Dropping?
The most significant factor contributing to the cryptocurrency bear market is fears of inflation and the rising probability of a global economic collapse. Economists are watching the interest rates rising, and according to a recent report from the Wall Street Journal, there’s a 44% likelihood of a recession in the next 12 months.
The stock market has been in disarray for the past couple of months, and since Bitcoin follows the stock market, it too has fallen dramatically this quarter. To add insult to injury, since altcoins follow Bitcoin’s price action, this created a cascade effect that caused a crypto market collapse, pushing most digital assets to record lows.
The Federal Reserve has been extremely active the past couple of months in its attempt to curb inflation and slow down recession by utilizing several tools such as raising interest rates. The Fed’s job is to stabilize the US Dollar, and so far, it seems that its efforts have been less than successful.
Global Crypto Market Capitalization at a Two-Year Low
With the sustained bear market for Bitcoin, Ethereum, and other cryptocurrencies like XRP, Solana, and the collapse of Terra Luna, the global cryptocurrency market capitalization has suffered tremendously, touching a two-year low.
The current market capitalization for the crypto market is at $860 billion, losing over $2 trillion in value since its peak in November 2021! The massive devaluation is affecting large and small investors and causing uncertainty in the market.
The good news is that crypto projects are on a fire sale, and those looking to Dollar-Cost average, purchase NFTs, or invest in virtual real estate, can do so for incredibly low prices.
Check out our article for the Top 3 Metaverse Projects to Buy Virtual Real Estate in (June 2022) for some of the best places to purchase virtual real estate during this bear market.
Will the Crypto Market Recover?
The question isn’t whether or not the cryptocurrency market will recover. The real question is when? It seems the selloff is still intensifying, and there doesn’t seem to be an end in sight. At this rate, it wouldn’t be surprising for prices to continue to struggle until next year, when the market might start rebounding from its all-time lows and attempt a trend reversal.
It all depends on the stock market and the condition of the US and the global economy to signal a trend reversal for cryptocurrencies. Keeping a close eye on inflation levels and CPI numbers is a good indicator of the direction the markets are moving in and could signal a trend reversal if inflation starts to decrease.
At the end of the day, markets are cyclical, and it’s only a matter of time before a bear market ends, and a bull market follows.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any project.
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