The crypto market started on the backfoot as Bitcoin plummeted to $38,000 last month. The drastic dip made the market experience a bloodbath as the majority of tokens traded below -50% from their all-time highs. However, the market showed signs of recovery this month and came out from its lows of January. Nonetheless, the market has been sending mixed signals this week and is mostly trading sideways.
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The market conditions hint that a fall in price cannot be ruled out and investors are mostly cautious with their moves. Analysts have also been advised to be watchful of the market conditions as another crash cannot be rejected.
Mark Newton, technical strategist at FundStrat has predicted that BTC can dip below $38,000 once again mirroring the January crash. ”In the event, BTC gets under $41,575, this postpones the rally, allowing for pullbacks to $38,734, or $37,711,” he said to CoinDesk.
Here’s Why Analysts Are Cautious of the Crypto Market:
1. Inflation in the U.S
The U.S inflation rate reached 7.5% making it the highest ever in 40 years. This is indicative that people are losing money to inflation in a pandemic era where there’s joblessness and no clarity on incomes.
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The global financial situation is also in turmoil, as countries are struggling to claw back after lockdowns and restrictions. On the other hand, day-to-day consumables have increased in price and so has the real estate market. The development stands at a stark opposite to dwindling wages that is reflecting the reduction in their purchasing power.
2. Less Buying Pressure in the Crypto Market
The crypto market had more buying pressure in 2021 than 2022, thanks to the Bitcoin crash in early January. The dip in price has burnt a hole in investors’ pockets and mostly only those with disposable income are trading. The others are playing the ‘waiting game’ to recover their investments and jump on the next crypto of their choice.
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“We know this because the aggregated cumulative volume data (CVD) for spot BTC has been stagnant while the CVD for futures has increased. This suggests that this price rise was driven by speculation or hedging rather than genuine demand,” Marcus Sotiriou, an analyst at the U.K.-based digital asset broker GlobalBlock told CoinDesk.
3. Ukraine-Russia Conflict
War is good for politicians but a disaster for the common people and their finances. Tensions between Ukraine and Russia are continuing to linger and the development is making investors sit on the sidelines. If Russia goes to war with Ukraine, the market will undoubtedly tumble and could reach lows below the January crash.
Therefore, the overall situation is risky for investors and people need to remain cautious while taking an entry position.