If you’re thinking of catching the falling Bitcoin knife, here are 3 reasons to consider waiting
Bitcoin BTC / USD has been in a sharp downward trend in recent months. Currently trading at $ 19,791, down from an all-time high of over $ 68,000. Before Bitcoin’s last crash, the cryptocurrency had floated between $ 28,000 and $ 32,000 for several months. The Bitcoin Fear and Greed Index is currently at 19, indicating extreme fear in the market.
Investors may consider buying Bitcoin right now due to the historic price movement with rally before halving. In addition, recent support from government agencies, which look at cryptocurrency regulation, is positive for Bitcoin in the long run. The bipartisan-supported law on responsible financial innovation proposed on 7 June represents state support for the regulation of cryptocurrency. Furthermore, the extreme fears that are present in the market classically indicate a good buying opportunity for Bitcoin. With a long-term horizon, current levels can thus provide an attractive purchase price for investors.
However, there are many bearish factors that maintain the downtrend in Bitcoin’s price movement. Here are three to consider:
It is large-scale illiquidity that is experienced by crypto companies globally. Three Arrows Capital (3AC), a major borrower and lender of cryptocurrencies, has experienced serious insolvency following the recent market crash. The company saved thousands Ethereum ETH / USD tokens, which causes its illiquidity to prevent investors from withdrawing their money globally.
Other companies, such as Celsius CEL / USD networks, has also faced illiquidity, which led to investors’ funds being frozen. Thus, the potential bankruptcy of these companies and the liquidity crisis across the globe is a bearish signal for Bitcoin in the short term.
Also read: Bitcoin, Ethereum, Dogecoin Rise: Is Crypto Finally Set for a Summer Relief Rally?
Secondly, the macroeconomic climate in the world is uncertain, with fears of an impending global recession. The Federal Reserve announced on June 15 that it would raise interest rates by 75 basis points, indicating quantitative easing (QT).
With too much paper money printed after the covid-19 pandemic, inflation rates had been on a continuous rise. In order to preserve the economy, it may therefore be an extremely bearish signal for Bitcoin to implement quantitative easing.
Third, the nature of Bitcoin is a risk element. Risk assets under recessionary market conditions experience much greater price volatility compared with risk-averse assets. Therefore, should global markets enter a recession, large-scale capital may flow further out of speculative asset classes, such as cryptocurrency. This may imply a further decline in Bitcoin prices.
Therefore, as market conditions remain turbulent and unclear, Bitcoin’s short-term price action looks bearish. But as markets begin to recover and investor confidence slowly recovers, Bitcoin, as the largest cryptocurrency, is likely to emerge from the bear market hibernation and return to global markets.
