Why Bitcoin and Crypto Markets Are Facing a Tough March

The cryptocurrency market is down today, following a major decline in the risky asset class after US Federal Reserve Chairman Jerome Powell made alarming comments regarding interest rates and high inflation.

The price of bitcoin is currently trading below $22,000, which is a worrying level for traders who believe that a drop below such a level will result in a trend reversal down to $19,000. Ether, which is currently trading at $1,555 and has a crucial support level of $1,450, also causes similar concerns.

37,374 investors were liquidated in the last day, totaling $87.6 million in liquidations. The largest single liquidation order occurred on OKX, with a value of $923.27K for the ETH-USDT-SWAP.

What you should know: The cryptocurrency market is not immune to volatility. Often, significant price changes are observed before the release of key economic data and the Federal Reserve’s statement on monetary policy and rate hikes.

In addition, Mt. Gox scandal, which will result in the release of 142,000 BTC this year, also the market sentiment. The Ethereum Shanghai upgrade, which has been postponed until early April, is another significant bias. As a result, there will be increased selling pressure because validators can now withdraw ETH from the Beacon Chain. Investors predict that the market will incorporate the effect through a pre-sale, noting that it is “likely” that the market will do so.

Silvergate Bank, one of the two major banks serving the crypto industry, is also in trouble (the other being Signature Bank). Recently, Silvergate Bank reported a loss of $1 billion for the fourth quarter of 2022 and disclosed a DOJ regulatory investigation.

The current SEC crackdown on centralized betting, along with subsequent enforcement actions against Paxos and Binance, have also hindered the emergence of long-term bullish momentum across the market. Although some decentralized staking systems may benefit from the latest enforcement, the regulatory climate for cryptocurrencies remains unclear and market volatility is often caused by uncertainty.

In case you missed it: A few weeks back, the US SEC began the latest wave of regulatory actions by targeting the Kraken monetization program. The SEC accused Kraken of “failing to register the offering and sale of its crypto-active staking-as-a-service platform,” which the agency claims qualified as a sale of securities, according to the $30 million settlement release. Kraken also agreed to stop running the Earn program in addition to paying the fines.

In response to the enforcement, Nexo also decided to discontinue its centralized betting program. While others argue that the betting ban is another blow to cryptocurrencies, Coinbase CEO Brian Armstrong has vowed to challenge the decision in court. Although not all SEC commissioners supported the enforcement action against Kraken, the organization announced new crackdowns due to this election.

Some crypto investors are predicting further selling, while Bitcoin analysts continue to issue cautionary statements about the continuation of the long-term decline. Below bitcoin’s $20,000, there is a future “gap” in the CME, and some traders predict that the price of the flagship crypto will return to this level at some point in the future.

Investors’ risk appetite is likely to remain low in the meantime, so potential cryptocurrency traders may want to wait until there are indications that US inflation has peaked or until the Fed indicates that smaller rate hikes are on the horizon. A more open regulatory roadmap for the cryptocurrency business will also help increase confidence in the area.