Excessive emotional reactions are regularly seen in investors in the volatile bitcoin market. Wealth may tempt people to take actions they later come to regret if the market rises (fear of missing out). People are frequently persuaded to sell their coins for dumb reasons when they see red numbers.
The fear & greed index changed from extreme fear to fear on Tuesday, with the cryptocurrency market remaining in “fear.” Investors typically avoid riskier assets in favor of safe-haven assets like the US dollar, gold, and government bonds. Risks of a bullish reversal in the cryptocurrency market are indicated by the change from great dread to fear.
The Fed interest rate decision on November 2nd will be the focus of this week. The markets are mainly expecting a rate increase of 75 basis points (bp) from the Federal Reserve. It will be negative for markets if the hawks’ focus on core inflation signals a fifth 75 bp rise in December. The economy has recovered from two consecutive quarters of declining GDP, and job creation is moving forward quickly. Currently, the number of job openings exceeds the number of unemployed Americans by a factor of four.
Amidst these difficulties, the crypto market has been surprisingly doing well for the past seven days. The total crypto market cap has surpassed one trillion dollars, and eight out of the top ten cryptocurrencies have risen significantly on a seven-day average.
At the time of writing, one Bitcoin is worth $20,635, and $45.15 billion worth of Bitcoin was traded yesterday. As investors wait for the US Federal Reserve to decide on interest rates, the BTC/USD has increased more than 6% over the past seven days. The current rise is likely to continue, according to the relative strength index and moving average convergence divergence (RSI and MACD), which are still in the bullish zone.
On average, other coins like Ethereum, BNB, XRP, Cardano/ ADA, and Solana have risen 15.07% in the last seven days. In this list of top ten cryptocurrencies, Dogecoin (DOGE) has stood out as it has risen by almost 150% since Elon Musk took over Twitter. Other coins were in the top ten list were stablecoins (USDT, Binance USD/BUSD, and USDC) which reamained more or less unchanged on a seven day chart.
Lower-than-anticipated investments in cryptocurrencies were made due to rising interest rates and a global increase in inflation. Even though the US inflation and interest rates receive a lot of attention, other nations, like India, have had comparable difficulties.
Grayscale says that when Bitcoin’s realized price exceeds its market price, the cryptocurrency bear market starts. If Grayscale’s results are correct and the current market cycle has a similar structure to the cycles in 2012 and 2016, the bear market may terminate between November 2022 and December 2022.
The fund was the first to have an ETF backed by Bitcoin publicly traded on the New York Stock Exchange. Its Grayscale Bitcoin Trust (GBTC) is the largest Bitcoin fund in the world. Since GBTC is a trust that invests in cryptocurrencies, you can purchase its shares using your brokerage account. By doing this, you skip the inconvenience of buying BTC through a cryptocurrency exchange and indirectly purchase it. This also implies that you depend on Grayscale to act as a middleman and buy and hold Bitcoin on your behalf.
However, there are more and more factors supporting the idea that the period of decline and accumulation in the crypto market will end. Crypto investors are puzzled by the contradictory scenarios between the 2021 crypto bull run and the 2022 bear market. Still, the present trend against the odds (Fed rate hike) implies a stronger and more resilient crypto market than ever.
One can notice that the current market collapse has been less severe than the declines experienced in the prior two bear markets for Bitcoin. The bitcoin price fell 86% in 2014 compared to its then-all-time high of $1177. And in 2018, from its then-all-time of $19,764, the price of BTC fell by 84%.