Bitcoin, Other cryptocurrencies on decline amid fears of Global Recession
- Posted on April 12, 2022
- Technology
- By Osinachi Gift
In view of the ongoing concerns about inflation and a possible global recession, the flagship crypto continued its drop on Tuesday.
Recently,
Bitcoin has fallen under the $40K mark, a drop of 5.4% for the day after touching a
high above $47K. It dropped 15% in 24 hours today, falling below $40,000 for
the first time since March 15th.
Ethereum, the second-largest crypto by market value,
is trading roughly over $3K, a decline of more than 6% since the middle of last
month, after dropping below this threshold earlier in the day. It’s part of a
larger trend, with crypto markets tumbling 8.5% in the span of 24 hours to hit
a market cap of $1.84 trillion, according to CoinMarketCap.
Bitcoin, which is historically fairly correlated to
other cryptocurrency prices is, of late, increasingly correlated with stock
prices. In March, BTC’s price correlation with the S&P 500 hit 0.49, with
-1 meaning they move exactly opposite and 1 meaning they move in perfect
tandem. It was the highest rate since October 2020, per Arcane Research.
If you’re looking for plausible answers as to why it’s worth checking out the equities markets. The S&P 500, an index of 500 top publicly traded companies in the U.S., closed down 1.7%, the Dow Jones Industrial Average ended Monday 1.2% lower, and the tech-heavy Nasdaq lost a full 2.2% of its value.
Stock prices would equally be considered as there are so many things going wary with it.
There’s the ongoing Russian war in Ukraine, a new
round of COVID lockdowns in China, and, of course, the Federal Reserve’s
decision to aggressively raise interest rates and choke off the supply of money
into the economy.
The Nasdaq was already down nearly 4% from Monday
through Friday last week. The weekend hasn’t made things much better. With less
money pumping into the economy as the Fed seeks to fight inflation, crypto
market caps very well may deflate, according to BitMEX founder Arthur Hayes.
The billionaire investment banker-turned crypto entrepreneur wrote on Sunday of
a “coming crypto carnage” and predicted that both Bitcoin and Ether had much
further to fall.
“Bitcoin and Ether will fall bottom well before the Fed
act and U-turns its policy from tight to loose,” he wrote. He predicted they
will test the $30,000 and $2,500 thresholds before the end of June. Hayes
previously predicted, when the price of BTC was below $5,000, that it would
reach $10,000 in 2019. That turned out to be prescient, as the price rallied to
above $12,000. A year earlier, he suggested that BTC could hit $50,000 that
year and would bottom out at between $3,000 and $5,000. While he was way off on
the former, the latter prediction was correct.
Bitcoin bulls are hoping Hayes’ most recent prediction
is wrong. But a look at today’s price movements indicates he could be on to
something.
Optics
· The
decline in Bitcoin’s 50-day moving average, below $42K, has investors wary. In
the event of a fix below this level, a direct path to the area of the March
lows near $38K is likely.
· Altcoins
such as Terra’s LUNA token, SOL, and ADA also suffered losses by double digits.
Also beaten down significantly were meme coins Dogecoin and Shiba Inu. There
was little trading.
· The
NY Fed released a study on Monday revealing that US consumers expect inflation
to pick up in the near future. Prices for food and housing are expected to rise
dramatically in the next 12 months, raising inflation expectations from 6.0% to
6.6%. Expectations for 3 years down from 4.2%.
· According
to consumers, rent is expected to rise 10.2% in the year ahead, while food
costs will jump 9.6%.
· A 6% increase in home prices is expected, up from 5.7% previously. Survey participants predict that inflationary pressures will worsen before they improve, which will worry Federal Reserve officials.
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