Will Bitcoin rise again after cryptocurrency market crash in 2022? This is probably one of the biggest questions on the minds of every cryptocurrency traders these days. For Bitcoin, these kinds of ups and downs are nothing new.
“Bitcoin still could form one last major low and that is preventing a lot of money from buying around the $30,000 area,” Edward Moya, senior market analyst at foreign-exchange brokerage Oanda, wrote in a report. “Macro conditions won’t improve anytime soon, so bitcoin might have an extended choppy trading period.”
First, ask yourself the question:
Why is the crypto market in a downtrend at the moment?
The story begins with the FED… the Federal Reserve.
The bull market in 2020 and 2021 was a consequence of the immensely accommodative monetary policy from the FED.
Late 2020, and early 2021 saw massive inflow into the crypto market due to the FED’s stimulus programs…
You probably heard it, they have been “printing money” so to speak, to stimulate the economy.
That large stimulus was initiated as support to the economy to eventually stimulate inflation, and when you do that you inevitably make speculative asset prices such as stocks and crypto more attractive to investors.
Hence the uptrend in both stocks and cryptocurrencies in 2020 and 2021.
Now the story is different, so going back to the question, why is the crypto market in a downtrend at the moment?
Because the FED is removing that same stimulus that created the bull market, now they are raising interest rates, they ended their QE program, which was effectively the “money printing” and they are now beginning the exact opposite of QE, which is the QT (Quantitative Tightening) program.
So, the FED is effectively engineering a correction in asset prices, why?
To tamp down inflation…
They pumped stimulus to stimulate inflation, not that inflation has more than materialized they are removing that stimulus to lower inflation.
Makes sense so far?
Good, so you now wonder
When cryptocurrencies will begin to rise again?
Well, now that you know why they are going down, you know when they will resume going up, which is…
When the FED stops tightening their monetary policy.
In other words, when they start talking about “easier monetary policy” which is simple words means they stop raising interest rates and pause or reduce their QT program.
I’m getting a little technical here, but bear with me.
To know when cryptocurrencies will bottom, you have to follow the FED’s monetary policy.
Their “easy” monetary policy of low interest rates, and QE program in 2020 and 2021 is what created the bull market.
Now their “tight” monetary policy in 2022 is what is creating the recent bear market.
So, logically, to time the next bull market you have to?
Follow the FED, and see when they stop tightening, that’s all.
It’s not about technical levels on a chart, it’s not about chart patterns, support and resistance, none of that.
It’s about FED’s monetary policy and their influence over speculative asset prices, in which cryptocurrencies are obviously included.
Now if we want to get even more technical we could ask, so when will the FED stop raising interest rates?
The answer to such question will vary, at this moment of time, the FED gas raised interest rates in March, May, and is expected to keep raising rates at every meeting until year end.
No rest for crypto bulls, but that can change, the macro environment could change, inflation may come down substantially, and the FED could decide to pause their rates hikes maybe around September.
That would push crypto higher again, but so far it’s not the base case.
At the moment the FED is committed to raising rates for as long as it needs to lower inflation.
Keep yourself updated by listening to the FED’s meeting and their comments, once they pivot (when they stop raising rates, or just simply hint at stop raising rates) it will be evident, and crypto bulls will be able to dominate again.
Hope this helps.
With no end in sight, the war, inflation, and shifting monetary policy in the U.S. will likely continue to drive more volatility in the coming weeks and months, experts say.
(source – Quora)
