Cryptocurrency traders are headed for a rocky ride as Bitcoin falls below $20,000 amid systemic and political economic worries.
Stefanos Oikonomidis of XM conducted a study, and the results show that there are several aspects. The increasing loss of digital assets can be attributed to these several issues.
These consist of the fallout from the collapse of Silvergate Bank, and rumors of increased regulatory monitoring.
The Silvergate Bank Tragedy Has Repercussions
The political economy conditions are getting worse, which is bad news for assets that carry a higher degree of risk. Moreover, the repercussions of the failure of the Silvergate Bank have already begun to have an effect.
Investors are concerned because, if the market is disrupted, they could no longer have access to the market for loans.
Due to banks’ tendency to cut ties with the cryptocurrency sector, the industry’s credibility is at an all-time low. Because of this, we now have less liquidity than we did before.
It has caused the whole market value of cryptocurrencies to slip below $1 trillion for the first time since January 14. This is the first time something like this has taken place since the start of the year.
A new low point on the Crypto Fear & Greed Index has been hit, which has not been witnessed in the preceding two months. This is a sign that more widespread destructive forces are gaining strength as a whole.
Recent shifts in the general state of the economy have also had a role in the depreciation of the value of risky assets.
Cryptocurrency markets have sold off due to US Federal Reserve Chair Jerome Powell’s aggressive views on interest rate hikes. These comments were made concerning the likelihood of future hikes in the interest rate.
As a direct consequence of this development, the business cycle in the United States has gotten further inverted. As a direct consequence of this, it has now reached the most severe level it has seen since 1981.
Cryptocurrency Mining Requires Energy
As a result of this event, it is quite likely that the value of cryptocurrencies would decline.
In the most recent US budget plan, there was a proposal to put a 30% excise tax on the amount of money. Mining activities for cryptocurrencies incur costs associated with their use of energy.
This could cause the mine workers’ reserves to become significantly more depleted. Because it’s very feasible that the vast majority of them will be forced to close their doors permanently in the end.
At this period, the government of the United States placed Bitcoin worth one billion dollars. It had been seized from sources tied to illicit activity into wallets that are managed by the government.
These wallets are subject to the government’s direct oversight at all times. Investors are concerned that the selling of such a huge amount of bitcoins might cause a price decline.
Technically, BTC USD has fallen below $20,000, setting a new low over the previous two months. Nevertheless, the 200-day simple moving average stopped any more drops from happening.
As a direct consequence of this, the most dominant cryptocurrency looks to be at a significant technological turning point. This is a crossroads in which a drop below the significant 200-day SMA can result in catastrophic losses.
There is also the chance that the oversold conditions may result in a bounce in the price. This is an alternative possibility.
Future Bitcoin Investors May Face Difficulties
In conclusion, cryptocurrency investors are likely to be facing challenging times in the future as a consequence of the battle. The cryptocurrency business is having to deal with many different dangers.
Because authorities are tightening their grip and the political and economic situations are deteriorating.
Whether cryptocurrencies will be able to recover their losses and recoup the ground they’ve made since 2023 remains to be seen.
