In recent weeks, the volatility that has long been associated with cryptocurrencies has been on showcase.
Concerns about a hawkish Federal Reserve are threatening to dampen risk appetite all over marketplaces, so investors are girding for more gyrations in bitcoin and other cryptocurrencies.
Bitcoin, the most popular cryptocurrency, has risen by around 33% since January 24 and is currently trading at $43,850, after a drop that saw its price fall by half from its November high. Its main competitor, ether, has risen around 45 percent to around $3,200 since January 24, after plunging nearly 56 percent from a record high of $4,868 in November.
Concerns that a future aggressive central bank tightening cycle will hamstring risky assets have found it challenging for some traders to sustain their bullish outlook.
Where is Market Headed?
Investor realigning their portfolios to account for a more assertive Fed, which is now anticipated to boost rates as many as 7 times this year, has caused their recent fluctuation. Year to date, the benchmark S&P 500 index is down 5.5 percent, while the tech-heavy Nasdaq is down 9.3 percent.
Cosmos, Terra Luna, as well as Polkadot, are three altcoins that have lost around 20.5 %, 38 %, as well as 25.5 % year-to-date, as per coinmarketcap.com.
One of the key difficulties for investors in 2022, according to Lily Francus, director of quantitative research approach at Moody’s Analytics, will be recognizing the risks associated with them and decentralized finance.
Cryptocurrencies will remain turbulent in the future, but there are still significant players on both the institutional and retail sides, so interest is still going to grow, according to Oanda’s Moya. As institutional investors are taking more interest in the cryptocurrencies and blockchain space, it will grow significantly.