If the bitcoin price stabilizes over the next two weeks, the extended bear market for crypto-currencies – also known as cryptocurrency winter – could end as quickly as it began.
So says Edward Moya, senior market analyst at brokerage firm Oanda, who says, “Wall Street is benefiting from a positive risk mood, which is good news for cryptos. According to him, the cryptocurrency market is starting to look “attractive now that the economy is looking a bit better as Fed tightening expectations have eased.” »
Moya refers to the rise in the stock market in recent days and a general easing of macroeconomic fears among investors. Often, a rise in stocks also leads to a rise in cryptocurrencies. According to him, investors are starting to be more optimistic about the economy, inflation and rising interest rates, which is a positive sign for risky assets. In general, the more confident investors are in the stock market and the general macroeconomic environment, the more risk they are willing to take.
Bitcoin surged above $23,000 on Tuesday, hitting its highest level in over a month. Ethereum has risen over 40% in the past few days and was trading above $1,500 on Tuesday.
Many crypto experts we have spoken with over the past few months were expecting one last major dip for the cryptocurrency market, with some targeting a floor between $10,000 and $14,000 for bitcoin. While that could still happen, Moya says that if more institutions buy in the next few weeks, it could allow bitcoin to bottom since “market positioning has become extreme. »
What is the outlook for the cryptocurrency market and how should investors react?
Less than a month ago, the crypto was in the midst of one of the worst market crashes it has ever seen. Bitcoin and Ethereum were down more than 70% since peaking last year. Several societyWell-known crypto companies, including hedge fund Three Arrows Capital and crypto lender Celsius, have filed for bankruptcy. The size of the industry itself had fallen below the $1 trillion mark, a significant drop from a few months prior when it was worth over $3 trillion.
But investors remain hopeful that the tremors of the past few weeks are coming to an end, says Marcus Sotiriou, market analyst at digital asset broker GlobalBlock. Cryptocurrency prices are rising as investors begin to feel more optimistic about the cryptocurrency market, thanks in part to the recent stock market rally in the United States, Europe and Asia, he said. Read also: After a great start, LUNA 2.0 drops 80% on its first day of sale. Cryptocurrencies, in particular bitcoin, have been following the stock markets closely since the start of the year.
“When the market starts reacting positively to negative news, it is a signal that a local bottom may be hitting for now, as fear may have caused the news to be priced in,” explains Mr. Sotiriou.
Despite the positive momentum in recent days, the cryptocurrency market is still suffering. Both bitcoin and ethererum are down more than 50% this year, and bitcoin posted its worst quarterly loss in more than a decade between April and June.
“We are in a full-fledged bear market, not a bear cycle. Just because we see positive price action doesn’t mean we’re out of the rut,” says Wendy O., crypto expert and educator. “We are currently trading at $1,500 [pour l’ethereum]and for me to be super bullish on ethereum we would need to break above $2,248. That’s a 50% priced pump right there”.
So what does the latest crypto rally mean for investors? This shouldn’t significantly change your crypto investments or the way you invest in crypto if you’re on this long-term path. Given the crypto’s history of volatility, this rise does not guarantee a long-term reversal. Crypto prices are just as likely to come back down as they are to keep going up.
Since the future of cryptocurrencies will certainly be marked by increased volatility, financial advisors recommend that you allocate no more than 5% of your investment portfolio to cryptocurrencies and only invest what you are ready to lose. Always make sure your financial foundations are covered – from your retirement accounts to your emergency savings – before putting additional funds into a speculative asset like bitcoin or ethereum.
“We have a long way to go before something happens,” O says.
Be vigilant and consult your financial adviser before making any investment decision. Mirror-Mag cannot be held responsible in the event of bad investments. Before using any third-party service, you should do your own research.