Over the weekend, the crypto market have been in a downward spiral. It began shortly after the launch of Ethereum Merge, which some had predicted would provide a major boost to ETH prices. However, the opposite happened, and prices went tumbling down after the bear run that seemed to have been triggered by ETH.
All of the top ten coins by market cap were in the red during the weekend, with Ethereum Classic being the worst hit. ETC tumbled by over 17 per cent in the past 24 hours, and that trend does not appear to be letting up. Bitcoin also suffered huge losses and fell below $19,000.
Is the Fed to Blame?
Some analysts are blaming the weekend-long bear run on the US Federal Reserve. Financial experts expect the Fed to increase its policy rate during a two-day meeting that will end on Wednesday. As such, it would appear investors are dumping their crypto exposure to beat the Fed deadline.
Reports indicate the Fed will hike its rate by a 75 base point increase; the third time it will be doing so. Investors in the crypto markets and traditional equities markets are bracing for impact. This, combined with higher-than-predicted inflation figures, has sparked fear over the upcoming rate hike.
All of the top ten coins have lost 6% to 11% in the past 24 hours. Bitcoin has now stagnated at around $18,400. The current bear run was triggered by the disappointing fall of ETH prices after the Merge. Thus far, ETH is down around 26% from its one-month-high of $1,800 in September 2022. Prices peaked in anticipation of the Merge.
Hope for Bitcoin
Some crypto analysts claim that Bitcoin bottomed and will not go lower. They claim that $18,000 may be the lowest BTC goes until March 2023. After that, they expect some kind of upswing. However, that will only apply if the Fed announces a 75 base point increase. If they go higher than that, it will lead to worse outcomes for the crypto markets.
Some investors are more bearish. There are those that predict BTC prices could drop to the 2018 lows. If that were to happen, BTC prices would drop to around $5000. That would be the worst-case scenario. Other analysts have more realistic predictions. They expect prices of BTC to drop to around $12,000. In general, everyone agrees that the next few months will be bearish for the cryptocurrency industry.
However, the likelihood of a 100bps announcement is only 20%. Despite this, some analysts point out that crypto markets have traditionally nosedived after a base point hike by the fed. Hikes saw a 10% drop in BTC prices in March, May, and June. However, the June drop was less severe than the previous drops.
With inflation and rate hikes around the corner, it is unlikely that the crypto markets will perform better than the analysts predict. Despite this, there may still be opportunities for profitability due to the volatility that is inherent in the crypto markets around the world.