Let’s take a look at how the crypto market is doing right now, what’s making people feel a certain way, what’s happening in the crypto world, and what might happen in the next few days.
In the last week, the worldwide crypto market has been up and down. Bitcoin (BTC), which was steady at about $28,000, suddenly went down to around $25,400 on August 17.
Right now, it’s around $26,026 as of August 22.
The crypto market went down, and this caused Ethereum (ETH) to also drop to $1,551.71, the lowest in five months. It’s now at $1,662.
Because interest rates might stay high and not many people are trading cryptocurrencies, the market went down. This shows that digital assets are still not very strong.
Even though Bitcoin has gotten better after last year’s low, many investors are still not joining in. This makes the market weaker and not as good for a strong increase in prices.
The situation is complicated, with the market being sensitive to changes and big economic influences. We need to look at what’s happening to figure out why the crypto world suddenly changed like this.
What Caused the Decline?
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SpaceX and How Elon Musk Shapes It
Elon Musk’s SpaceX was linked to a major theory about why the decline happened. An article in The Wall Street Journal on August 17 suggested that SpaceX might have sold its Bitcoin, which was worth a huge $373 million. When well-known companies, especially someone like Musk, do things in the crypto market, it affects a lot of people.
The crypto market drop came shortly after the WSJ’s report, so the timing was important for the sudden fall in prices.
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Worries About Interest Rate Increases
The worldwide financial system has a big impact on the cryptocurrency market. One idea about why the market went down is because people thought the US Federal Reserve might raise interest rates in the future.
The U.S.Fed hinted today that more interest rate hikes could be coming for us all as they aim to fight inflation – the stock market isn't loving it: $SPY -0.6%, $QQQ -0.9%, $DXY Up 0.3%, nearing it's 1 month highs. 10y Treasury yields rise to 4.27%. Are you feeling the inflation… pic.twitter.com/9b6HMEGaVm
— JasonRaznick (@JasonRaznick) August 16, 2023
When interest rates go up, regular investments might seem better, and that could mean less money going into risky things like cryptocurrencies.
Since Bitcoin’s price was stuck between $29k and $30k and there weren’t any good news to help it, more people started selling their Bitcoin. This made the situation worse.
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How Increasing Government Bond Yields Affect Things
Another important factor affecting the recent changes in the crypto market is how government bond yields are going up. This isn’t just a simple trend in the financial world.
Let's talk bonds.
As we get closer to a credit event/recession, bonds become the go-to investment vehicle. During such events, US Treasury yields drop. As such, long-term bond ETFs ( $TLT ) flourish.
Remember, as we get closer to a recession, US Treasury yield spreads begin… pic.twitter.com/eVrSP0xNc8
— Lavan Pathmanathan (@LavanPath) August 18, 2023
Even though it might not seem clear, there’s a connection between bond yields and cryptocurrencies based on how people invest and how markets work.
When bond yields go higher, bonds become more interesting for investors because they give back more money. This can make investors move their money from things like cryptocurrencies, which are riskier, to bonds, which are safer.
When people sell their cryptocurrencies, it can make the market less stable, leading to prices going up and down more.
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Effects of China’s Financial Changes
The recent news that China’s Evergrande Group filed for Chapter 15 bankruptcy protection has worried not only the regular financial markets but also the cryptocurrency sector.
Evergrande has been struggling with a huge debt of more than $300 billion and reported big losses of $81 billion for the years 2021 and 2022. This made the Chinese Yuan lose its value, which might have contributed to the recent fall in the crypto market.
Another thing causing concern is the situation with Tether (USDT), a popular stablecoin in the crypto world. Because of the Evergrande issue, Tether’s situation has come into question.
Tether’s backing and its ties to the Chinese financial system make people worried and unsure. Tether said before that it didn’t have a direct link to Evergrande’s debt, but the exact details of what Tether has as reserves are still a secret.
What’s Next?
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Effect of the Ripple Case on the Market
Judge Analisa Torres has allowed the SEC to appeal a decision in its lawsuit against Ripple Labs. This has sparked discussions about whether Ripple’s XRP should be considered a security or not.
This legal process could establish rules for how cryptocurrencies are regulated in the future. The outcome could impact not only Ripple but the entire crypto industry. The uncertainty might make the market more unstable as investors respond to possible changes in how crypto assets are treated in the eyes of the law.
Because of this ongoing uncertainty, market feelings could be affected and the value of XRP and other cryptocurrencies might also be influenced.
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Success of El Salvador’s Bonds and Bitcoin Adoption
El Salvador’s decision to adopt Bitcoin as a legal form of payment has coincided with a 70% increase in the value of its dollar bond, garnering global attention. This success in bond returns could showcase how embracing digital currency might contribute to economic stability.
Other nations could observe El Salvador’s experience with interest and might contemplate similar approaches. However, they must carefully balance the potential advantages with the inherent volatility of cryptocurrencies.
Such developments could offer a brief boost to cryptocurrency prices, countering the prevailing negative sentiments that have been impacting the market.
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Advancements in Crypto Trading Platforms
Major Steps in Crypto Adoption: Europe’s first spot Bitcoin ETF debuts on Euronext Amsterdam exchange, alongside Coinbase gaining approval to offer Bitcoin and Ether futures in the US. These moves mark progress in bringing cryptocurrencies to the mainstream audience, making investment easier for everyday people.
This could lead to higher demand and stability in the crypto market. However, the introduction of such products also brings increased regulatory attention and potential for further integration into traditional financial systems.
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Approaching Bitcoin’s Halving Event
Bitcoin halving is a regular event that happens around every four years. During this process, the rewards that Bitcoin miners receive for validating transactions are cut in half. This reduces the rate at which new Bitcoins are introduced into circulation. The next halving is set for 2024, when the block rewards for miners will be reduced to 3.125 BTC from the current 6.5 BTC.
Looking back at previous halvings, there has often been a period of increased price volatility leading up to the event. Prices have sometimes dropped significantly, as seen before the last halving. The recent drop in Bitcoin’s price, influenced by factors like SpaceX’s Bitcoin sale and concerns about interest rates, aligns with this historical pattern.
If history repeats itself, the 2024 halving could see a similar trend of prices dropping before the event and then gradually increasing afterward due to the decreased supply of new Bitcoins. However, the current market landscape and positive narratives around Bitcoin might lead to a more stable situation this time. Nonetheless, it’s important to be cautious, diversify your investments, and consider strategies to manage risks during potentially uncertain times.
Navigating the Volatile Market: Strategies to Consider
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Grasp the Trends in the Cryptocurrency Market
To navigate the current market, it’s important to examine recent trends and fluctuations. Currently, there are two possible scenarios for Bitcoin’s price movement: it could either rise towards $30,000 or experience a short-term increase followed by a decline to around $24,000. However, if the market doesn’t exhibit positive signs, the downward trend might continue, possibly reaching the $17,000 to $18,000 range.
For those who still struggle with market structure and are trying to wrap their heads around it- let's ignore wave structure for a moment and look at pure price action:
The current structure is identical to the one we saw on $BTC at 16-18k prior to a 60-day rally to ~60k.… https://t.co/ykOdrWnyoN pic.twitter.com/PS3lrMKbGy
— CrediBULL Crypto (@CredibleCrypto) August 19, 2023
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Effective trading strategies
In the current market, some experts are predicting that the price of Bitcoin might revisit the range of $24,000 to $25,000. It’s important to be cautious and avoid making hasty decisions during this time.
$BTC look at all these red candles and the rsi (4 hr rsi is at 10 lol).
Only a dumbass or someone completely new to the market would sell/short here.
Nothing goes down forever, price always move in waves. One bounce/green candle will wipe out 5 red candles. pic.twitter.com/QIgN8IWJVQ
— Trias.Whale (@HeWasRight99) August 17, 2023
During this market phase, it’s risky to engage in short-selling or taking highly leveraged long positions. While the chances of a direct decline to $18,000 might not be very likely, it’s still something to consider.
Managing your crypto investments involves some key strategies. Many are focusing on well-established cryptocurrencies and larger altcoins while being cautious about smaller investments during uncertain or declining markets.
Keeping a balanced approach is important. Instead of trying to predict exact lows, it’s better to consistently monitor the market. Having a clear trading plan that aligns with your strategy and risk management can give you confidence in your decisions.
Looking forward, the crypto market remains uncertain yet full of possibilities. Pay attention to government actions, regulations, and economic signals that could impact digital currencies. Significant events like potential approval of Bitcoin ETFs might bridge traditional finance with the crypto world.
Remember, the journey ahead is complex, so stay watchful and only invest what you’re comfortable losing.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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