— One year ago today, Bitcoin hit an all-time high of $69,000.
Yes, you read that right. It has already been a year since Bitcoin hit its all-time high before it struggled for grip and I think this is a great time to review what the cryptocurrency market has been up to.
The cryptocurrency market is not as volatile as it used to be as the euphoria faded away. Coupled with the changes in the macroeconomic climate, the appeal of digital assets pales in comparison to other asset classes such as the US dollar and defensive stocks.
In this article, we will talk about Cryptos and examine if it’s still worthwhile to pay attention to them.
Article Outline
- Bitcoin Price Chart
- Story Time: What Is Happening?
- Interest Rates Changes
- The Hype Is Temporary
- Regulations: Good or Bad For Cryptos?
- Knock Knock, Who Is Still There?
- Trading Volume
- Should I Still Focus on Cryptocurrencies?
- Benefits of Crypto CFDs
- Latest Bitcoin Analysis
We will use Bitcoin as a proxy because it has been consistently ranked first in terms of market capitalization, trading volumes, etc. For the average Joe, it is almost synonymous with Cryptocurrency.
Get Instant Access to Crypto CFDs 24/7 with Alchemy Markets
Bitcoin Price Chart
BTCUSD Daily. Source: TradingView
Comparing the price chart for the same period from last year, it is apparent that both trading volumes and activity have dropped considerably for Bitcoin.
Story Time: What Is Happening?
From my point of view, the following are some of the key reasons for the shift in the Crypto markets’ dynamics
Interest Rates Changes
A swift recovery from the pandemic accompanied by uncertainties around the world such as political unrest in Ukraine and Russia, and Covid restrictions in China have led to inflation surging worldwide. As a result, we witness rate hikes upon rate hikes in major economies including the United States, the UK, and the Eurozone, to mention a few.
Most cryptocurrencies are considered risk assets. When interest rates are climbing, the opportunity cost for holding them increases because of the higher risk-free rate. However, I did notice that Bitcoin held up very well over the past few FOMC announcements, which is great news.
The Hype Is Temporary
Towards the end of 2020, the excitement for Bitcoin and other cryptocurrencies, in general, resumed after nearly a year of ranging markets.
Ordinary people started to hop on the bandwagon but it is just a matter of time before they start losing money. It is almost impossible to be consistently profitable without any financial knowledge and a well-built trading plan.
Thus, most of the people who lost money eventually gave up, exited the market, and start spreading false negativity across the internet about how Crypto is a scam, leading to more uninformed traders leaving the market.
Regulations: Good or Bad For Cryptos?
The American Securities and Exchange Commission (SEC) increased its efforts in recent months, conducting high-profile inquiries into the collapsed cryptocurrency businesses Three Arrows Capital and Celsius Network, as well as a rumored investigation into Yuga Labs and the larger non-fungible token (NFT) market.
While some market participants are concerned about these probes, others view them as positive catalysts and are optimistic that a more secure and regulated environment is on the horizon.
Knock Knock, Who Is Still There?
Who remains in the cryptocurrency market now that it has become relatively stable during recent months?
Well, every type of participant just like a few years back, except for some retail traders who lost money trading cryptos and vowed to never deal with cryptos again.
- Retails Traders
- Institutional funds
- Government (El Salvatore for instance)
- Public Companies (TSLA, Coinbase, Square, etc.)
- And many more
Some retail traders come and go as they find out shortly after joining that investing in cryptocurrencies are not for them. The remaining ones had faith in themselves and their trading skills and chose to continue trading.
Aside from retail traders, the other participants mentioned above have greater exposure to regulatory changes, etc. due to the nature of their businesses and the size of their transactions. But they are still present in the market and continue to make up the majority of the trading volume.
Actually, trading Crypto is easier for us now because there are lesser volatility and random price spikes. A stable market condition means we can execute our trading strategy better.
Crypto trading and transactions are very much still active. In fact, the trading volume is significantly greater compared to just 2 years ago, which brings us to the next section.
Trading Volume
Source: THE BLOCK [1]
According to the graph above, trading volume across major cryptocurrency exchanges peaked in May 2021 and started to cool down since then. Nonetheless, it is still a great deal more than what it was back in 2018, 2019, and 2020. The industry is growing and getting mature and being an early adopter of cryptocurrency means getting a head start in terms of knowledge and related experience.
Trade 60+ Crypto CFDs 24/7, Commission Free
Should I Still Focus on Cryptocurrency?
There’s a good possibility that you should. Why?
Because we can trade Crypto CFDs instead of owning the cryptos themselves! Why is this important?
By owning the cryptos, your portfolio will be more sensitive to interest rates. Moreover, you will need to keep an eye on regulatory changes since they will potentially affect your crypto holdings. A drop in trading volume in cryptocurrency exchanges may be a problem if you want to transact with the best trade execution.
However, if you trade cryptos via CFDs, you don’t own them. You are purely speculating on their price movements. You can even go short on them if you think they are going to fall!
To sum it up, yes, we should definitely be on the lookout for the next trading opportunity in cryptocurrencies via CFDs!
At Alchemy Markets, you can trade more than 60 Crypto CFDs commission free, 24/7!
Benefits of Crypto CFDs
Instead of buying and selling the actual cryptocurrencies themselves, you can speculate on their prices and make potential profits hassle-free at Alchemy Markets.
By trading crypto CFDs,
✓ 24/7 Availability
✓ Commission-free
✓ Crypto Wallet Not Required
✓ Leverage Up To 10:1
✓ Improved Liquidity
✓ Go Short or Long
✓ No Gas Fees
✓ Quick Sign Up
✓ Hedge Short-term Risks
We published a new article on this topic, come check it out here
Latest Bitcoin Analysis
BTCUSD Daily. Source: TradingView
Let’s zoom into the recent week’s price action. The first thing that caught our attention was the beautiful bullish channel. However, Bitcoin is attempting to break to the downside as we are writing this, with the 50 Daily SMA acting as a temporary support.
Based on this price movement, we forecasted two possible scenarios for Bitcoin.
- A rebound from the 18500 key support zone.
This is based on the fact that this zone has prevented prices from declining eight times in the past 5 months. - A break below 18500.
If Bitcoin closes strongly below this key zone, we will be convinced that Bitcoin finally found a longer-term direction. Our targets would then be near the $13880 support zone.
Don’t miss out on the next Crypto Trade!
References
https://www.theblock.co/data/crypto-markets/spot/cryptocurrency-exchange-volume-monthly
Ru Yi
Financial Market Analyst
Sign up and trade with Alchemy Markets now.
The only place where you get to trade more than 1000 instruments including Stocks, FX, Cryptos, and many more with ultra-low spreads and institutional-grade liquidity.
