Bitcoin, no other cryptocurrency is able to divide parts of the population like the most popular cryptocurrency of them all. For some, it’s freedom, sound money, and a fascination; for others, it’s a worthless, money-destroying asset with nothing behind it.
Nevertheless, the bare numbers do not speak for Bitcoin at the moment. Since its all-time high, Bitcoin has lost more than half of its value and is currently hovering around the $30,000 mark. However, crypto experts continue to see downward pressure as the fundamentals are currently against Bitcoin. As long as this downward pressure continues, Bitcoin could even fall back to $20,000, and some even see the cryptocurrency falling below that.
While Bitcoin is not a risky investment for many, traders prefer Bitcoin because of its volatility and lack of regulation, which makes everything easier. Therefore, it is also a risk asset that thrives on liquidity in the market. A downturn in Bitcoin can have an impact on the entire crypto market.
For the bulls and long-term investors, the move by central banks, especially the Federal Reserve, is therefore unfavorable because interest rate hikes and balance sheet reductions mean less liquidity in the market. This puts pressure on prices. In addition, persistently high inflation is making many ordinary consumers think twice about investing their money in Bitcoin or preferring to spend it on groceries at the supermarket. Rising fuel prices aren’t helping either, further squeezing the purchasing power of ordinary citizens. Bitcoin has not proven to be an inflation hedge so far this year.
Under these circumstances, long-term investors can only wait and see when liquidity returns to the market, which will help Bitcoin get back on its feet. When that happens, the bulls will come back and the hype can start all over again. Until then, it remains to be seen what will happen in the economy, as a global recession is already on the verge and a necessary shakeup of the crypto market is also yet to come. It is yet to be seen whether Bitcoin will survive this.