The possible resurgence of interest rates, new monetary policies from the FED and the political crisis in Kazakhstan have caused the crypto market to fall by 11,5% since the beginning of the year. Bitcoin, the leading cryptocurrency in the market by capitalization, has registered its worst fall in the last 5 months.
The cryptocurrency market has lost nearly $308.000 billion in market capitalization since the beginning of 2022. The 11,5% drop in the crypto market is currently being driven by the resurgence of interest rates, the tightening of monetary policies by the United States Federal Reserve (FED), and the current political crisis in Kazakhstan. Added to all this are the fears caused by the emergence of new variants of the Covid virus, which appeared at the end of 2019, causing great damage to the world economy.
Source: CoinMarketCap
Analysts also point out that a recent decline in investor interest and the massive sell-off of cryptocurrencies in the market are increasing the downward pressure that is evident in the value of the main cryptoassets currently. To date, Bitcoin, the largest cryptocurrency on the market, has lost $130.000 billion in market capitalization in the last 10 days; a drop that puts its price at levels seen last September.
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Reasons behind the fall of the crypto market
Several factors are influencing the recent crypto crash. As mentioned, the nervousness and uncertainty that the Fed's plans, the repressions in Kazakhstan and the low levels of on-chain activity have aroused in short-term investors and beginners are shaking the markets and causing a massive sell-off of cryptocurrencies.
Bitcoin price fell from the $46.000 support level to touch $41.700 at the time of writing. Bitcoin fell to $39.690 on Monday. Other cryptocurrencies such as ETH, SOL, ADA, DOT, XRP, LUNA, DOGE, AVAX, LINK, MATIC, UNI, LTC, ALGO and XLM are accompanying the fall in BTC value, with corrections of up to 25% weekly, according to the report. data from CoinMarketCap.
Fed Monetary Policies
Monetary policies announced The Federal Reserve's last week have triggered a fall in the stock markets that has spread to the cryptocurrency market. The US regulator reported that this year it will begin to reduce stimulus plans and liquidity injection, while raising interest rates earlier than expected and at an accelerated pace, up to 4 times this year, to reduce inflation levels and recover its economy. According to the FED, the US economy could see an early recovery this 2022, which is momentarily motivating investors to put aside cryptocurrencies, in order to bet on lower-risk assets.
Crisis in Kazakhstan on edge
The dramatic and turbulent crisis in Kazakhstan due to the increase in fuel prices and the resignation of the country's government is affecting Bitcoin mining. Kazakhstan is the second country with the highest concentration of hash rate Bitcoin in the world. However, the harsh measures implemented in the country against its citizens in recent days have caused the computing power of the network to fall by 3,8%.
Source: Blockchain.com
Kazakhstan controlled about 22% of Bitcoin's computing power as of August. Analysts point out that while Bitcoin mining and cryptocurrencies are not being directly restricted in the Asian country, they are part of the collateral damage suffered due to the restrictions imposed, such as the nationwide internet service shutdown to repress citizens.
Falling levels of use and interest
The number of active addresses on the Bitcoin network has dropped by 7,8% in the past month, according to data from data The Block. Likewise, on-chain adjusted volume is also down 12,8% since the beginning of this year.
Source: The Block
Search interest for Bitcoin and Cryptocurrencies has also seen a slowdown in recent days. According to data from Google Trends, searches for the term Bitcoin are at 85 points, after being over 100 earlier this week. Searches for NFTs have gone from 45 points to 40 points currently. The same goes for the term Metaverse, which has gone from 6 points on Monday to 5 points at the time of writing.
Massive sales and liquidations
The panic that has gripped investors has caused a massive sell-off of cryptocurrencies in the market. On the other hand, the drop in value of crypto assets liquidated more than $330.000 billion in the last 24 hours and more than $2.400 billion in the last week, according to data from Coinglass.
Source: Coinglass
The overall sentiment in the crypto market is bearish, with short-term investors dumping their positions for fear of a further drop in the price of crypto assets. However, more experienced long-term investors and industry whales are in a moment of maximum accumulation, taking advantage of the drop to acquire more cryptocurrencies and increase their holdings exponentially.
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