The cryptocurrency market has been seeing a slump and top virtual tokens recorded another slide in prices today. Bitcoin once again dived under the $42,000 level, while other major cryptocurrencies also lost some more ground. While the global crypto market cap was trading mostly sideways, the total 24-hour trading volume also saw a decline. So, what is driving this downward movement for the world’s major cryptocurrencies?
Global macro-economic indicators
The US Federal Reserve, arguably the most important central bank in the world, is expected to hike interest rates multiple times through the year to curtail the rising inflation in the country. The hawkish stance of the US Fed has made investors more cautious of investments, while weak macroeconomic indicators due to the resurgent COVID-19 wave have made bond yields significantly more attractive to investors.
As a result, riskier investments like cryptocurrency and equities in tech and growth stocks have seen a sharp sell-off.
“Cryptocurrencies weren’t spared either, with fierce selling seen initially, although there was some respite nearing the final hours. The $40,000 and $3,000 mark for Bitcoin and Ether, respectively, remain key support levels to watch as a break below these levels on strong volume could see significant downwards pressure for crypto at large,” CoinDCX Research Team stated, reported The Economic Times.
Bitcoin and Ether, the two biggest cryptocurrencies in the world, have so far stayed above their support levels of $40,000 and $3,000. But any dip below these levels will have a strong impact on the rest of the cryptocurrency market, with significant downward pressure.
“The market is digesting a number of things,” Osprey Funds founder and CEO Greg King told CoinDesk TV. He added: “Risk assets like crypto are going to sell off or experience a bit of churn as the market adjusts to a different macro environment.”
Increased threat of regulation
The complete ban on digital tokens in countries like China remains a threat for cryptocurrencies in many parts of the world. While India didn’t table the crypto Bill to ban all private virtual currencies in the recently concluded Winter Session of the Parliament, reports indicate that the country is waiting to see what other nations like the US bring in, in terms of cryptocurrency and DeFi regulations in the near future.
While major cryptocurrencies are still holding above their minimum support levels, technical analysis suggests that the slump may just be a small blimp in the overall cryptocurrency journey for the year.
(Edited by : Thomas Abraham)