Bitcoin’s losses this month continue after the world’s leading cryptocurrency stumbled below $40K early on Monday. It hit the lowest price points since March and is over 20% down from last month’s surprising highs. It’s clear that the cryptocurrency market is in a slump, with further price declines expected. The current secondary support level is at $27,000, with further pullbacks expected in the coming weeks. The silver lining is that investors may still turn to Bitcoin if the Fed hikes rates to fight inflation.
Still, for current Bitcoin holders, this isn’t good news. After last month’s highs, Bitcoin has been in yet another slump with price drops that go deeper than expected. In recent times, cryptos have been moving with tech stocks, and as they drop, the biggest pessimists say that it could drop to $30,000 come June.
The Fed’s Inflation Response is Key
Inflation rates are soaring in the USA and elsewhere around the world, prompting the Federal Reserve to take steps and subdue it. It is expected to hike the rates in 50 basis point steps in the following months which should keep higher inflation at bay. With that decision, it will surely influence the price of Bitcoin and other cryptos.
In the coming months and years, holding dollars will be more valuable. Due to this, many investors will likely turn to Bitcoin and cryptocurrencies or assets such as gold. The negative correlation of Bitcoin with real rates has emerged in the past few years, and it seems it’ll continue moving forward. Of course, Bitcoin will still be driven by other factors such as network usage and user growth. Still, it’s important to understand the evolving macro relationships and how they influence the crypto market.
Tech stocks have been a driving force for Bitcoin’s price lately. They’ve been down this past week which correlates to another price slide. It remains to be seen how Elon Musk’s new acquisition, Twitter, factors into tech prices and cryptocurrencies. Musk is a long-time crypto supporter and if he somehow integrates it into the social media platform, price jumps are to be expected.
Market in the Red
It’s not just Bitcoin that’s been having a recent slump. The whole market is in the red, with only slight gains on some fronts. It’s clear that the market is in a downward slide which should prompt 3-6 months of price recovery.
Many experts believe the current situation to be a short-term pain and long-term gain. If that’s the case, the recovery will come soon enough via a pivot by the Federal Reserve. The Fed won’t be able to sustain its inflation-busting monetary tightening for a long time, eventually switching back to easing. The whole world expects a global recession, which might make BTC fly.
It remains to be seen when that happens, with most experts predicting current levels to keep through at least June. If there’s any major movement, it’s likely to show its face later this year.