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Why is crypto bull not yet over for cryptocurrency despite several jolts

As per a report by Grayscale, a financial service provider revealed that the crypto bear market commences when the realised price of Bitcoin surpasses its market price.

Why is crypto bull not yet over for cryptocurrency despite several jolts
This is the first bear market in which there is a correlation between the stock market and Bitcoin, with a correlation rate of over 0.6 in July 2022

The drop in the global market capitalisation of digital asset and cryptocurrency reached below the $2 trillion mark this January, this is believed to have led to uncertainty among investors. “Rising interest rates and a global increase in inflation have lowered the anticipated investments in cryptocurrencies. Even though the US inflation and interest rates receive a lot of attention; India, has had comparable difficulties,” Saurav Raaj, founder, and director, Wize, a business application service provider company, told FE Blockchain.

Meanwhile, from its all-time high of $69,044.77, attained on November 10, 2021, the price of Bitcoin (BTC tickers down at $18,978) has dropped by more than 70% since then. Similar to this, the price of major cryptocurrencies like Ether (ETH) has decreased by $1,280. 

Earlier this year, the Federal Reserve had noted that it implemented strict steps to accelerate the tapering of monthly bond purchases. “The Federal Reserve increased the federal funds rate twice a year. This leverage was the other cause of the bear market. The downside of leverage is that when the prices fall, the trading positions liquidate and result in a crypto crash, “Gaurav Mehta, CEO, Catax, a crypto exchange company, said.

A report by Grayscale, a financial service provider revealed that the crypto bear market commences when the realised price of Bitcoin surpasses its market price. “If the current market cycle takes a similar structure as 2012 and 2016 cycles, the bear market could end between November 2022 and December 2022,”Raaj, noted.

History of Bitcoin halving. Source: Swyftx

Earlier, Bitcoin’s halving preceded crypto bull runs as indicated in the above graph.

Furthermore, industry observers believe that the 2022 bear market is distinct due to several factors including rising interest rates and inflation exacerbated its effects. Furthermore, the start of the bear run was also influenced by the Terra-LUNA meltdown and huge leverage throughout the whole crypto ecosystem. “This is the first bear market in which there is a correlation between the stock market and Bitcoin, with a correlation rate of over 0.6 in July 2022, according to data by Coin Metrics, a crypto financial intelligence company,” Gupta added.

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First published on: 25-10-2022 at 08:33 IST