Bitcoin saw its fifth consecutive session in negative territory on Monday dropping below $31,000 for the first time since July 2021. The declining valuation of the world’s largest cryptocurrency by market capitalization has been joined by other digital coins alongside US equity markets.
Experts think that if Bitcoin goes below $30,000, it could fall to around $25,000 as more investors cut their losses and run seeking shelter in more secure assets. The woes of the crypto market have to do with its volatility as Wall Street tumbles and questions about its future wider adoption as well as possible new regulations.
Investors seek stability in volatile times
“Volatility in the market stems from speculation,” according to Alex Miller, chief executive officer of Hiro. His company creates developer tools for Stacks which is the network enabling applications and smart contracts for Bitcoin. He told Reuters it’s his belief the rapid decrease in value of Bitcoin and the rest of the crypto market lies in the highly speculative nature of the digital currencies.
Cryptocurrencies have plunged in tandem with Wall Street, and almost on par with the tech-centric Nasdaq, as investors fret about the Federal Reserve’s next moves to tame inflation. Although markets celebrated policymakers’ decision to hike interest rates by half a percentage point last week, jobs data on Thursday erased all the gains from the previous day.
The stronger than expected numbers led to worries that the central bank will take an even more aggressive tightening path in June causing a recession. In turbulent times investors seek shelter in more stable assets such as US Treasury bonds.
“The most important thing to do to prep for bear markets is to have maintained a balanced portfolio,” Miller said. He recommends that investors “not overinvest in assets that you can’t afford to wait out a crypto winter with.” But looking back at every past downturn, when it comes to long-term assets such as Bitcoin the best thing you can do “is hold, or even increase your position if you’re set up to do that,” Miller advises.
“The crypto market is in a wait-and-see mode”
Compared to the strides made in 2021 by the crypto market, this year has been less lackluster. A growing number of retail investors jumped into the market last year driving up the value of Bitcoin to just shy of $69,000, its now worth less than half that according to CoinDesk. Additionally, more businesses began accepting digital coins to purchase goods and services.
But it still remains a niche market and mainstream adoption is not coming as fast as people expected. “What we’re seeing is that the crypto market is in a wait-and-see mode,” Edward Moya, senior market analyst at Oanda, told CBS News.
He says that investors also want to see what will come out of special administration task force President Biden may set up to regulate the digital marketplace. The role of cryptocurrencies in the developing metaverse is also on investors radar.