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Monday, January 30, 2023

Is the cryptocurrency market alive again?

If there’s anything the year 2022 will be remembered for, at least as far as investments are concerned, it’s This is due to a sharp drop in practically any asset or investment market. Following the global crisis triggered by COVID in mid-2020, most of the world’s central banks, such as the ECB or the FED, opted for rapid and wide expansionary monetary policy. This produced a huge injection of capital, which reached the pocket of the small investor and from there it was transferred to various markets, such as cryptocurrencies. In itself, this fact has already pushed up astronomical revaluations in many growth stocks around the world.Marking one of the longest and shortest rallies of the past decades.

In the specific case of the cryptocurrency market, it coincides with excitement and liquidity. With bullish periods within cycles governing bitcoin’s behavior, These typically occur approximately every four years, due to the rate of issuance of new units of the cryptocurrency resulting from bitcoin mining, an event known as coincidenceThereby, the value of the reward is halved to validate the transaction.

In any case, the effects of two of these events, monetary injection and the bitcoin cycle, created the perfect environment for major increases in 2020 and 2021. When monetary stimulus slowed and fiscal policy tightened, raising interest rates from late 2021, optimism evaporated. Everyone knows what came in 2022; A year in which there were multi-million cumulative declines of 50, 60 or even 70% in titles ranging from Bitcoin to Tesla or Meta.

downfall with positive aspects

over the years, beyond what is strictly referred to as investing yes interesting movements have been observed Such as the expansion of the NFT market, the maturation of decentralized finance for less expert users, or the use of cryptocurrencies and their networks by large companies and social networks around the world. In fact, technology itself blockchainWhich supports the existence of cryptographic assets is also seeing a progressive adoption across a multitude of industries and use cases.

blockchain Today it is increasingly creeping into more processes, from document management and registration to the traditional financial industry, where it is being introduced to conduct securities transactions that are traded on the Nasdaq, following the evolution of the antiquated SWIFT system. In form, or as the fabric through which CBDCs will move between central banks, commercial banks and users. For all these reasons, despite the volatility in the markets, the signs point to progress in industry adoption.And that it can be a breeding ground so that, when the macro environment improves, crypto market behavior will also improve.

a markedly speedy january

First week of January after a slow start to the year The cryptocurrency started a positive trend again, Bitcoin started a clear upward path on January 9, revaluation from the area of ​​15,500 euros to 21,100 from January 1 to a maximum of 23 months, or which is the same, a revaluation of 36%. For its part, another cryptocurrency, Ether, rose by 39% over the same period. As a result of the increase, the total market capitalization reached one trillion US dollars.Thus recovering what was lost after the collapse of the FTX exchange in early November.

part of this bullish behavior It is created by mass liquidation of short positions. Or is it just a blowout for many investors who were still looking for blood in the market and bet on more downside. In fact, short liquidations exceeded $2,000 million. While it may seem like the positive movement of the past few weeks was a false bullish break to capture more bearishness, there is data indicating green shoots are starting to appear.

a lower leverage and more favorable market

One of the interesting aspects of the cryptocurrency market is access to metrics on-chain of various protocols and devices. i.e, Keeping in view the transparency provided by blockchainYou can see what funds are in which wallet, where they are stored and in what types of financial products, As a result, today it can be seen that the leverage level has come down significantly, which is a positive sign, as it indicates more rationality in the market as well as makes it difficult to make sudden movements like black swans.

Further information on-chain Shows that large accounts have large amounts of stablecoins. In other words, they are in a position of liquidity. The moment a trigger produces institutional buying, it can be a catalyst for raising anticipated demand that remains dormant.

For its part, the financial environment is loosening a bit. Interest rate hikes in the United States have, in theory, already seen their highest numbers. Although some increase of 0.25% is still missing and the terminal rate is unknown, it is true that US fiscal policy is loosening, something that the European will plagiarize in a delayed manner, and pave the way for all investment markets. . Even then, The macroeconomic environment remains highly complex, and also uncertain, so prudence and risk management should prevail. Whatever the case, it looks like 2023 is off to a good start.

World Nation News Desk
World Nation News Deskhttps://worldnationnews.com/
World Nation News is a digital news portal website. Which provides important and latest breaking news updates to our audience in an effective and efficient ways, like world’s top stories, entertainment, sports, technology and much more news.
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