Last November, the crypto market exceeded the symbolic threshold of $3 trillion in marketcap. Barely 6 months later, this level has already halved, bringing the capitalization to levels not seen since August 2021. Bitcoin below 33,000 dollars, Ethereum at the threshold of 2,400 dollars, nothing is going well on this market high risk. But why in the end? Answers in this article!
State of the crypto market
Before going into the analysis of the causes, it is important to contextualize the crypto market at the moment T. At the time of writing these lines, the price of Bitcoin is $30,829, down 15% over the last 7 days and more than 30% since the beginning of the year. Since its all-time high, reached last November, the mother of cryptocurrencies has lost more than half of its capitalization .
The following table shows the 10 main altcoins and their evolution over the last 7 days and since the beginning of the year:
|Current course||Evolution over 7 days||Evolution since the beginning of the year|
|Ethereum (ETH)||$2,293.11||– 13.94%||– 36.41%|
|Binance Coin (BNB)||$312.38||– 13.96%||– 37.20%|
|XRP (XRP)||$0.5008||– 12.19%||– 37.09%|
|Sunshine (SUN)||$68.28||– 17.43%||– 59.93%|
|Cardano (ADA)||$0.6384||– 13.79%||– 51.79%|
|Earth (MOON)||$32.53||– 28.77%||– 35.63%|
|Dogecoin (DOGE)||$0.1092||– 9.75%||– 32.30%|
|Avalanche (AVAX)||$46||– 13.93%||– 57.06%|
|Polka dots (DOT)||$11.67||– 19.04%||– 58.31%|
|Shiba Inu (SHIB)||$0.00001627||– 19.48%||– 51.48%|
Since the start of the year, altcoins have therefore tended to underperform Bitcoin. Indeed, for the top 10 altcoins, the minimum fee is close to a 30% drop. The Cardano, Avalanche, Polkadot and Shiba Inu projects are experiencing a drop of more than 50%. Looking at the last 7 days, only Dogecoin shows losses slightly below 10%.
Crypto market: a mirror of the stock market
While some have long claimed the opposite, it is clear that the correlation between the stock market and the crypto market is very strong . And the least we can say is that the equity market has been struggling in recent days. The fault with the monetary policy of the FED, resulting itself from the strong inflation in the country of Uncle Sam.
If the last FED meeting on Wednesday had seen the stock (and crypto) market soar, Thursday and Friday had completely erased the gains of the day before the day before. In the longer term, the tightening of financial conditions should negatively affect the price/earnings ratio of equities . Creating the conditions for instability in the market because when this ratio compresses, future profits drop in value and the trend to follow becomes less and less obvious and readable.
Other geopolitical events such as the war in Ukraine also affect the equity market and, by extension, that of digital assets. Difficult for the time being to envisage a rapid exit from the crisis in this thorny issue. The influence of this geopolitical context could therefore continue to weigh on risky markets.
Year-to-date, the NASDAQ is down more than 23% , while the S&P 500 is posting losses of more than 15% over the same period. In France, the CAC 40, the main stock market index in Paris, shows losses similar to those of the S&P 500. On the scale of the equity market, these are chasms.
Should we be worried?
To this question, each investor will bring his own answer. If the market has been falling for several days, it is impossible to say that this movement has reached its lowest point. According to market analysts, a certain number of parameters could make it possible to permanently reverse the trend.
Notably the more widespread adoption of cryptocurrencies as a means of payment . But for that, it would be necessary that a large number of actors, and not the least, initiate the process. Some already dream of seeing Amazon offer Bitcoin payments.
In the longer term, other parameters such as institutional investments could also play the role of bullish reversal in the market. Some analysts believe that a massive return of institutional investors will only happen after broader regulation of the crypto market. Be that as it may, the Fear and Greed index which reflects market sentiment is 11 (Extreme Fear). The crypto market today is largely dominated by fear.
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