Cryptocurrencies: analysts fear “massive capitulation” from investors

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It is common to see the price of cryptocurrencies fluctuate over short periods of time. On many occasions, the price of bitcoin has fallen to rebound better afterwards. But for some time, the falls follow one another… The price of bitcoin is currently recording a daily loss of 3.87%. Yesterday, September 6, it fell below the $19,000 mark. Several financial experts fear that investors are leaving the game for good.

Investors are now showing serious signs of risk aversion. Naeem Aslam, chief analyst at AvaTrade, told the financial news outlet Barron’s, that the narrowing daily amplitude of bitcoin’s price change suggests that if it takes another massive hit, investors could finally start selling in droves. ” We think this capitulation can happen any day now, as bitcoin has been trading in a tight range for a long time. “, he explains.

However, according to Craig Erlam, senior analyst at OANDA, a significant break at this point could be really damaging “. In the worst-case scenario, the sell-off could be so intense that it could easily push prices towards the $12,000 mark, Aslam clarified. This isn’t the first time analysts have predicted a bitcoin crash, which ultimately didn’t happen. But the market was largely shaken this summer and the global economic context no longer really encourages taking risks.

Cryptocurrency market below $1 trillion mark

On June 13, bitcoin plunged below $25,000 — a level it hadn’t seen in just under two years. This was down 65% from its highest level, dating from November 2021. A month later, Tesla had sold three-quarters of its bitcoins (it had bought some worth $1.5 billion). in February 2021, when bitcoin was worth around $43,000). Elon Musk had however assured on Twitter that his company would not sell any bitcoin. According to Barclays analystsTesla would have lost almost half a billion dollars of its investments in bitcoins.

The biggest digital asset now sits outside the $20,000-$25,000 range it hovered in for much of the summer, following its dramatic drop in mid-June. Experts say this summer’s brutal crash, combined with general financial gloom, could lead to the end of risky investing. In addition, policy tightening by the US Federal Reserve (Fed) strengthened the US dollar, which weighed on these assets. In other words, cryptocurrencies no longer inspire trust.

Because bitcoin is not the only one to falter: the entire cryptocurrency market has lost nearly 2 trillion dollars since the peak of November; today it is below the 1000 billion dollar mark. According to the CoinDesk website, Ethereum (ETH), which has largely outpaced bitcoin’s gains in recent months, is down more than 8% and is now worth just over $1,500. Binance is down 5.7% and worth around $265. Absolutely all cryptocurrencies are affected by the decline.

If we see the dollar starting to come back down, then we should be able to bring risky assets such as bitcoin back up. », Vijay Ayyar told CNBCvice president of corporate development and international at cryptocurrency exchange Luno.

A new “crypto winter” in anticipation

Bitcoin, like most cryptocurrencies, trades in close correlation with stocks today — so if stocks fall, cryptocurrencies follow. However, all risky assets have been hit hard by the credit crunch implemented by major central banks in response to soaring inflation rates around the world. In US markets, the NASDAQ posted its seventh day of consecutive losses; the index has lost 27% since the start of the year.

This isn’t the first time the market has faced an extended decline — what experts call “crypto winter.” The last such event occurred between 2017 and 2018: bitcoin and other cryptocurrencies crashed after experiencing a strong rally in 2017. The 2017 crash was largely due to the bursting of a speculative bubble », recalls Clara Medalie, research director at crypto data firm Kaiko. At that time, people invested in emerging cryptocurrency businesses in droves, but most of these ventures fell through.

The situation today is different, as it is based on macroeconomic factors, particularly inflation. The fall was observable from the second quarter and many players in the sector were caught off guard. In addition, the profile of investors has changed. ” Prior to 2018, most crypto investments came from retail consumers […] Institutional and corporate investors now account for a much larger share of investments », wrote KPMG in a report.

Ayvar nevertheless wants to be reassuring. He said that unless bitcoin breaks below $17,500, the market is likely consolidating in the $18,000-24,000 range. Some investors, who remain optimistic about the future of this cryptocurrency, see it as a buying opportunity. Similarly, KPMG analysts are convinced that ” well-run crypto companies with sound risk management policies, a long-term view, and strong cost and risk management approaches can survive for the next six months.

Source : Barron’s

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Cryptocurrencies: analysts fear “massive capitulation” from investors


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