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Speaking of bitcoin, after hitting record highs last November, it took a big dip in December. After that, those who trade on credit began to leave this market. But new investors did not appear in their place with such large sums of money. The arrival of new investors means a lot. Such is the mood in the crypto market. Bitcoin enthusiasts may have celebrated 13 years on January 3rd this year, but the overall climate for viewing cryptocurrencies as a long-term asset has yet to arrive. In such a situation, people buy on a dip and sell when the price rises. But this time, even after a 35 percent drop in bitcoin, there is no emphasis on adopting this strategy.
In fact, the enthusiasm in the crypto market has cooled. To support the economy, the relief package given by central banks around the world since 2019, reduced interest rates, the cash pumped into the markets by buying bonds, all that goes on for some time to be withdrawn. . The Bank of England has also raised interest rates to deal with inflation. The US Federal Reserve has announced a reduction in its bond buying program. He will also raise interest rates soon. This will make it expensive to invest by borrowing. This had a big impact on the sentiment related to crypto. Bitcoin, which was around $47 thousand on January 1, fell from 43 thousand on January 6. Between January 5 and 6, the total value of the global crypto market fell by more than 6 percent to below $25 trillion due to the crash that came from the US Federal Reserve’s interest rate signal. More than $81 million in crypto futures were liquidated between January 5 and 6. Liquidation occurs especially when the exchange strongly interrupts the borrowed transaction for the trader. This is done to avoid the risk associated with margin.
The second largest cryptocurrency, Ethereum, has also had a major impact on the signals received from the US Federal Reserve. Between 5.-6. In January, the price fell by around 10 per cent. On November 10 last year, it reached an all-time high of $4,850. But due to the softening that started in December, it has now reached about 3 thousand 300 dollars. Last January, the price of Ethereum was around a thousand dollars. It ended the year with growth of almost 400 per cent. But now it looks like it could take a long time to slide. Coins like Dogecoin, Shiba Inu to Solana, Polygon, Uniswap and Cardano are also going through a downward trend.
The factor of cryptomining is also behind the drop in the price of coins. Concerns have been raised about the excessive consumption of energy in crypto mining. Cryptocurrency mining stocks also saw a decline in December amid a softer environment. Microstrategy fell by almost 20 percent and Riot Blockchain by more than 35 percent. Investors do not look at coins and stocks separately. Therefore, the atmosphere of softness in one affects the feelings related to the other.
There is also a development related to regulation in America behind the slowdown in the crypto market in the new year. The US is the largest bitcoin miner in the world right now. To avoid strict regulations in their country, many Chinese miners have also made their base in America. In such a situation, due to the excessive consumption of energy, the concern for the environment in America has increased. The US Congress is about to hold a hearing on the impact of cryptomining on the environment. The hearing is likely to take place at the end of January.
A development in Kazakhstan is also responsible for the decline seen in cryptocurrencies. Kazakhstan’s share in bitcoin mining is up to 18 percent. There, the bitcoin hashrate dropped by about 14 percent due to internet-related problems in almost the entire country. This resulted in a significant drop in value. Kazakhstan is the second largest crypto mining market in the world. The protests, which started with outrage over high fuel prices, are intensifying. Thousands of people have been arrested. Many people have also lost their lives. The effect of such a situation in Kazakhstan can also be seen on the crypto market in the coming days.
Earlier, in the last days of December, big investors also invested heavily in cryptocurrencies amid rising cases of Omicron and tightening steps by central banks. According to FalconX, several US funds increased investments at the end of December. Crypto market experts say volatility will remain for some time. He says that the price of bitcoin can remain between $ 40 thousand to $ 55 thousand. But Goldman Sachs’ assessment is completely different. He says that when you see the way digital assets are being adopted around the world, people will switch from gold to them. If this happens, the market share of bitcoin will increase. Goldman says that if this happens, it will not be surprising if the price of bitcoin goes up to one lakh dollars.
Whatever may be the issue of price, those who invest in crypto should keep this thing firmly that they should not invest more than 5 percent of the money they have left to invest in crypto. Also remember, investing the same money in it, even if it goes down, your financial health will not take a big hit.
Voice: Rohit Upadhyay