May 2022 year began with the collapse bitcoin rate. This is the largest the fall crypts has been going on since November 2021 – that’s when bitcoin reached its peak value of 67500 dollars. After reaching ATH (All Time High – the maximum historical value), the global bearish trend began in the bitcoin market, which continues to this day.
Cryptocurrency market cyclical – long-term bullish trends are replaced by bearish ones. Therefore, it is too early to talk about a global panic in the cryptocurrency market. But fundamental indicators speak of stagnation in the market and a temporary lack of interest among investors. In the current article, we will comprehensively assess the prospects of crypto coins, as well as key reasons for the fall of cryptocurrencies. Are there conditions for recovery? prices crypto assets in the short term – more on that later.
Global causes of the collapse
Crypto market is directly related to the classical exchange markets, which are controlled by the United States. The main reason for the collapse is the US monetary policy. It turns out that the Bitcoin chart has a direct correlation with the US monetary policy chart. This circumstance is especially clear on the higher timeframes. What does this mean for the average investor?
4 May current there was a sensational meeting of the US Federal Reserve. The American regulator raised the value of the key rate by 2 points – such information was known in advance, so many were ready for this. The impact is extremely simple – the increase in the rate in the US makes it profitable to place dollar deposits in US banks. Government bonds (bonds) are beginning to show high yields. Investors immediately begin to “transfer” money from gold and cryptocurrencies into the above assets.
Inflation in the US and Europe has reached critical levels, so the increased rate, as well as other methods of regulation, will be in effect for at least one year. In addition, the world of cryptocurrencies turned out to be insufficiently decentralized. A huge cumulative volume of coins belongs to US funds and multinational corporations. Problems with decentralization most fully manifested themselves in May of this year, when tokens Terra Luna and UST collapsed to zero.
The wave of euphoria in the cryptocurrency market is over, investors have again begun to soberly evaluate cryptocurrencies that have low or no collateral. Fundamental investors have also shifted their focus towards classic assets. Also, active participants in the cryptocurrency market are aware of the strong connection of cryptocurrencies and exchanges with American regulators. The SEC and FinCEN are capable of influencing the exchange rate of coins, as well as influencing the internal policy of cryptocurrency exchanges.
Actions in the center of the Eurasian continent showed that some countries may be excluded from the cryptocurrency sphere. Cryptocurrency services have begun to block some foreign users and withdraw their funds. Such chaotic behavior crypto exchange and regulators also resulted in an additional outflow of funds. ubiquitous growth prices does not allow many to place savings in cryptocurrency. And many solvent persons who have moneywere cut off from cryptocurrency services.
Well bitcoin in 2021 year showed record values - after the ATH update, he was simply obliged to “leave” for a correction. Therefore, external negative circumstances only strengthened the coming correction. However, the principle of cyclicity suggests that the bullish trend is already close, since key investors were able to gain positions by purchasing depreciated crypto coins. The current price of bitcoin is as follows:
What does technical analysis say?
Consider the main indicators of technical analysis and other tools that allow you to assess the current state of the virtual currency:
- The fear and greed index says that cryptocurrency collapsed. The index value is at 10. This can be interpreted as follows – investors have no interest in cryptocurrency at all. On the other hand, the index suggests that a “window of opportunity” has opened. Recession will be replaced by significant growth, and fear will be replaced by greed.
- When considering the Bitcoin chart, it is clear that the Stochastic oscillator did not enter the intersection after the decline. Therefore, it is too early for short-term investors to open long positions. However, very soon such an opportunity will be provided.
- Three moving averages “missed” the price for themselves – the information can be used in conjunction with other TA indicators to soon move on to buying BTC.
- RSI and MACD are also talking about the need to buy bitcoin.
It should be noted that the indicated forecast is also suitable for other cryptocurrencies from the TOP-100. They are considered mature and have predictable volatility.
All major coins directly correlated with bitcoin. Therefore, the following rule works – if cryptocurrency collapsed bitcoin, then other tokens follow it. The opposite statement will also be considered fair – the growth of BTC entails an increase in the value of other coins.
Cryptocoins are outsiders
Investments these coins caused significant losses – let’s evaluate the largest outsiders from the TOP-100 list:
- LUNA – the coin has lost almost 100% of its value;
- DOGE — the meme-coin was “pumped up” a year ago, now its price has fallen 10 times compared to ATH;
- LTC (Litecoin) — the coin fell approximately 5 times;
- XRP – the Ripple coin has fallen in price by 4 times in a year.
The protracted bearish trend has most strongly affected these coins.
Coins that went against the market
Let’s take a look at some interesting projects why did cryptocurrencies fall — and these coins went against the market? Usually interest is associated with uniqueness blockchaincapable of solving the problems of mankind. The following examples can be given:
- NEAR – the coin grew 10 times and went into correction along with the market, but still the rate remains 3 times higher than a year ago;
- Solana – ultra-fast blockchain allowed to increase the value of the coin by 76% in a year;
- FTM is a project aimed at creating infrastructure for smart cities. Profit for investors for the year amounted to 44%. Hundreds of percent were earned by traders who fixed their profits on time;
- SHIB – continuous listings allowed to earn hundreds of percent. Now the coin has gone into a deep correction, but even the current rate reflects an annual yield of 17.4%.
You can also make good money in a bear market. A portfolio with strong projects will allow you not to think about the question why did cryptocurrencies crash.
Prerequisites for the recovery of cryptocurrencies
The end of hostilities in Europe will lead to a decrease in inflation and offset other negative crisis phenomena. However, this will not happen quickly, and a change in monetary policy will take some time. This means that a visible improvement in the global economy could occur by the end of 2022. Such a forecast inspires moderate optimism.
The stock market also crashed, cryptocurrencies have some correlation with it. Therefore, the growth of the main US indices will also make it possible to intensify the purchases of cryptocurrency traders and investors.
Many investors ask the question why did cryptocurrency fall today. The answer is quite simple – “crypto winter” is now in full swing. The capitalization of the cryptocurrency market has collapsed twice, the trading volume exchanges also fell, and the main coins collapsed by 40-60%. The current drop is the largest since 2020 of the year. However, such a depression is always replaced by a phase of growth. Experts argue that a powerful bull cycle could begin as early as 2024.
However, do not underestimate the cryptocurrency. It is already used as a means of payment in many countries. Blockchain allows you to run games, store NFTs, take cryptocurrency loans. Virtual coins have already firmly entered the lives of many, their developers continuously offer new solutions that are aimed at improving human life. This means that soon fall of cryptocurrency in Russia and other countries will come to an end and a new rally will begin.
Technical analysis and fundamental factors make it possible to give fairly accurate forecasts. Many traders listen to authoritative opinions, what about cryptocurrency today. Let’s turn to the leading cryptocurrency experts for answers.
- Let’s evaluate the opinion of a trader under the nickname Trade-lab, who constantly publishes his own articles on the TradingView portal. The portal user and reputable analyst believes that bitcoin volatility is at a minimum. This is fraught with sudden movements. The price of the asset will start from the level of $26,800 – this level looks very indistinct. The best reversal signal will be a divergence on the daily timeframe, which will allow the price to bounce to the level of 44 thousand dollars. If this does not happen, then the price will continue the bearish movement and stop at the $20,000 mark.
- Peter Thiel recently announced a statement in which he spoke of the imminent collapse of the central banks. The investor, who “raised” Vitalik Buterin on his premiums, considers bitcoin to be the new gold. Thiel argues that in the short term, Bitcoin will show multiple growth.
- Andy Heckt, an analyst at Investing.com, says the following: stocks are falling in price, while bonds have collapsed to an 8-year low. The Ukrainian-Russian conflict only exacerbated the global financial problems. All this had a negative impact on the value of the cryptocurrency, which scared away momentary speculators. Hecht clearly described cryptocurrency collapse – the reasons also lie in the 40-year highs of inflation, the dollar index rose due to the actions of the Fed. This led to an outflow of capital from the cryptocurrency market. The analyst noted that crypto assets will soon find the bottom and rebound from it – the market recovery will attract new buyers.
This article provides detailed answers to the question, what causes the fall of cryptocurrencies. Analysts are leaning towards growth, but so far their opinions are being spoken with caution. The situation is aggravated by the global crisis and the lack of new buyers in the market. However, this situation will end sooner or later – after all, any market is cyclical. The current “crypto winter” is not the end of the history of cryptocurrencies, so new rallies and price records are ahead.
The materials presented in this section do not constitute individual investment advice.