Bitcoin down to a 10 month low following a rate hike by the Fed
Following the 0.5% rate hike by the Federal Reserve last Wednesday, 4 May, crypto market has suffered severe losses. Personally, I expected the downturn caused by the fear of that hike to more or less end once the hike took place. I turned out to be wrong - it is still on the downward trajectory.
Crypto market cap, all cryptos, Year To Date (9 May 2022)
Image: CoinMarketCap
The overall capitalization of the cryptos tracked by CoinMarketCap - which is pretty much all known cryptos - has gone from roughly 2.2 trillion USD at the beginning of 2022 down to roughly 1.5 trillion USD today, or slightly more than 30%.
The price of leading cryptos has taken a significant dip too. Only since 4 May the BTC went from over 39,000 USD down to under 31,000, or 20% down. Over the same time period, ETH dipped from over 3700 USD to under 2300 USD, or over 35% down. It may seem like bloodbath, and on some level it is. Of course, to regain some optimism it is enough to recall various experts who a few years ago were opining that crypto currency is nothing but a fad that would never amount to anything, or take a look at the relevant graphs and realize that lows of today looked like dream-like highs a few short years ago.
Now, for what it's worth - and I admit I was wrong on this one, as I have stated above - I still expect this dip to be temporary. Perhaps the rate hike is indeed holding back inflation thus giving the US dollar a boost. But given that ultimately more and more dollars are being put into circulation, as well as the fact that the crypto adoption is roaring right along - especially when it can be purchased at a discount - I think long term the trajectory has nowhere to go but up.
References
Bitcoin, Ethereum Technical Analysis: BTC Slips to 10-Month Low, Below $33,000
Eliman Dambell, Bitcoin.com, 9 May 2022
Federal Reserve expected to raise basic funds rate by as much as 50 basis points next week
@borepstein , 1 May 2022
Federal Reserve lifts interest rates by 0.5 percent in bid to slow inflation
Rob Wile, NBC News, 4 May 2022
This was already expected as the FED was going to increase rate. If one see cryptos as a long-term investment, no need to worry.
Long term - yes, it will rebound I am sure.
Short term - I think we are in a panic mode, it may drop really low.
The Fed is always late and I think a recession is very likely. The print of the GDP numbers for the US was already negative so I don't think people are that optimistic right now. Prices will rebound eventually but it's hard to tell how long that will take though.
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