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Can we expect the Crypto market to bounce back ?

BTC, Ethereum and other top crypto cryptos saw decline in their values in the latest crash causing dips in the portfolio of investors around the globe. Even though we saw a small upward moment in the market for few days it was brought down by a quick correction putting BTC again below $40,000.

There's a lot said about why is the crypto market crashing. Most experts say it's  a combined effect of uncertainty over increased regulation, hawkish move by Federal Reserve, and Russian invasion of Ukraine.

Why is the Crypto market crashing ?

Some analyst believe that BTC is due for a big decline in the coming months. The crypto surged to a all time high of almost $69,000 in November 2021. It’s now trading below $40,000, down almost 40% from its peak, but it’s worth noting that cryptos are known for its volatility.

Carol Alexander, professor at Sussex University, said she expects BTC to tank below $10,000 in 2022, totally wiping out all of its gains in the past year. Well this is just one side of a story, there are other analyst and investors predict that crypto will soon rise following its mass adoption.

The volatility associated with cryptos have been on full display in the recent few months. Bitcoin, the largest crypto, was up by around 33% and recently traded at $43,850, rising from a tumble that reduced its price to half from its all time high in November last year. Ether, the second largest crypto was up by 45% , following a 56% dip from its record high of $4,800.

Bitcoin and its peers saw record gains over the period of last two years, rallying along with tech stocks as the Fed and central banks pumped stimulus into the global economy. BTC is up 1,039% since March 2020 and ETH has risen by 2,940%, though the price rallies of both cryptos have been interrupted by numerous selloffs.

Recent volatility in the crypto market has come amid a broader market selloff by investors trying to reshape their portfolios to account for aggressive Fed laws, which is now expected to raise rates by 7x this year due to rising inflation. The S&P 500 index is down 5.3% year to date, while the tech-based Nasdaq has nearly lost 9%. Aggressive central bank rules and upcoming policies has made it difficult for traders to maintain their bullish outlook on Bitcoin and other cryptos.

Russian invasion of Ukraine had a big impact on the both stock and crypto market wiping out wealth of investors in quick time.

Analyst at JPMorgan estimates Bitcoin’s current fair value at around $35,000-$38,000 based on its volatility in comparison with that of Gold, another asset investors use to hedge their portfolios against inflation and economic fluctuations. Meanwhile, correlations between Bitcoin and the S&P 500 index reached an all-time high on Jan 31, according to data from BOFA Research, striking the possibility of using the crypto as a hedge against stock market turbulence.

Road ahead for Crypto in 2022

There are questions floating around regarding the future of Crypto and should you be squaring off your position or buying the dip.  Nobody knows exactly what will happen in the future and it is advised to stay updated with the latest news.

Much will depend on the government policies. Like China, the world's largest crypto market, banned all crypto activities in September 2021. Analysts say as blockchain technology will gain wider adoption, this will only isolate China from the rest of the world. In India, the government has proposed a crypto bill to regulate use and trading of cryptos (Also 30tax on the gains made through trading crypto and NFTs). 

Blockchain company Ripple labs is fighting with U.S watchdog over XRP token, a crypto it is closely associated with. The SEC claims that XRP is an unregistered security and $1.3 billion worth of XRP tokens were illegally sold by Ripple and its executives. In counter to the allegation by the SEC, Ripple says XRP shouldn't be considered a security.

Many experts believe that regulators are focusing on stable coins like Tether, USDC. These tokens whose value is directly tied to the price the U.S. dollar. Tether, the biggest stable-coin in the market, is under the hammer because of some questions being raised on it, whether it holds enough assets in its reserves to justify its value as dollar.

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