Early on Tuesday, Bitcoin and other cryptocurrencies rallied, but not enough to move the needle in the right direction. Digital assets are still in a depressed mood amid pressure from the crypto industry’s current cracks. Selloffs in the stock market and the ongoing war in Ukraine are making things more complicated. The world has been in a state of crisis for some time, and fears about a tough winter are putting a lot of pressure on cryptocurrencies as well.
Still, the latest rally is a strong sign that Bitcoin won’t give up that easy. It fell just short of trading for $20,000 on Tuesday, hitting $19,700 at one point, which is a 2% increase compared to Monday. And things are obviously not going to end here. According to some analyst, there’s a great potential downside, so expect further dips.
Closing in on Oversold
The latest price metrics show that Bitcoin is close to oversold levels. Many experts believe that investors should be cautious about buying the dip. Bitcoin is struggling and in the case of another big selloff, it could lead to capitalization from miners. A larger-than-life downside movement is expected soon, so it may not be the ideal time to jump into the market.
Struggling Bitcoin miners are a big obstacle for Bitcoin’s price right now. Amid high prices and energy costs, miners could unload their coins to crypto funds. This adds further pressure to the market and puts the price in a downward spiral. Of course, the current state of the market is not caused solely by miners. Stocks are a much bigger problem, which is surprising considering the fact that the crypto system was built to be independent.
In theory, cryptos should trade independently from mainstream finance. However, in the past year or so, they’ve traded shoulder to shoulder with other risk-sensitive assets. These include gold and tech, of which the second is in a heavy bear market itself. S&P has just ended the worst first-half year in the last 50 years, while Nasdaq is in the red with 30%. A major financial crisis is looming, and Bitcoin and cryptos are reeling.
Tight Monetary Policies Causing Trouble Too
Besides the falling stocks, tight monetary policies from financial organizations and high inflation rates are another bit problem. Fear and uncertainty have led Bitcoin to become extremely cheap. Until the inflation slows down, which won’t happen soon considering the state of the world’s affairs, financial stability is not expected.
It wasn’t like that not a year ago when Bitcoin hit its high of $69,000 in November. It looks like another century from this point of view, with Bitcoin trading at half that price. Even though it has surged together with Ethereum on Tuesday, the overall sentiment on the fear & greed index is extreme fear, and there seems to be no light on the horizon.
It’s tough times for Bitcoin investors and crypto fans, but just like always, we’ll weather the storm and move ahead.