After hitting the jackpot of $2.97 trillion market value in November of 2021, the entire crypto market’s value has fallen around 34% to $1.97 trillion. With three weeks into 2022, bitcoin has failed to get a foothold and continues being bearish. Investors, as per various analyses, are losing riskier assets in light of the Federal Reserve’s intentions of tightening its monetary policies and raising the interest rates later this year. This has been haunting the crypto market for some time now.
According to the WSJ, the direction taken by bitcoin trading, so far this year, is identical to the Nasdaq Composite, which is down by 7.3% year to date. Adding onto the crypto investor’s fears, the International Monetary Fund in a blog post last week said a sharp decline in BTC prices can increase investor risk aversion. This can also lead to a decline in investments in the stock markets.
Moreover, bitcoin’s decline has also to do somewhat with Tesla accepting meme coin Dogecoin as payments for some of its merchandise. Elon Musk had taken the DOGE community by storm with an announcement on Twitter that Tesla merch buyable with dogecoin. The meme coin enjoyed the spotlight before slumping back to pre-tweet levels.
But this isn’t new for cryptocurrencies. A number of crypto assets have had their fair share of the limelight thanks to tweets or comments by billionaires. And crypto enthusiasts are already aware that cryptos are very much volatile. Lucas Outumuro, the head of research at IntoTheBlock, highlighted that the cocktail of hope and distress has split the crypto market about what to expect next.