The crypto markets have witnessed massive corrections in the last two months. As of today, the global cryptocurrency market capitalization is down to $949 billion, from the high of $3 trillion it touched in November 2021. Weak global signals amid higher inflation and rate hikes of interest have led to a massive sell-off in the crypto markets. Investors and traders are now wondering if the crypto markets will pick up again this year. Crypto industry experts have different views on this question.
While some experts believe that the crypto markets will recover from the current crash in the coming months, others think that investor caution will persist in the short term.
“I strongly believe that cryptocurrencies will go back up. By August 2022, the bloodbath and crypto winter should be over. By the end of December or January 2023, Bitcoin may reach an all-time high of $70,000,” Dileep Seinberg, founder and CEO of MuffinPay, a bill payment and utility token, told FE Online.
“Few solid reasons, other than geopolitical uncertainties, make Crypto recognized for its purpose and usefulness. Government regulations will be key drivers later in the year,” he added.
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The correlation between cryptocurrencies and financial markets is growing. Cryptos have responded along with global financial markets which have also been hit due to weak global signals.
With inflation set to persist for about two years, experts say an impending economic downturn may continue to weaken crypto markets.
“Given the high correlation of the stock and crypto markets, macroeconomic headwinds such as decade-high inflation and rising commodity prices negatively affect crypto markets. The US Federal Reserve’s aggressive stance on quantitative tightening to control inflation will further exacerbate the downward trend in cryptocurrency prices. Since the US money supply has been growing at a rate of 18 percent, three times the rate of growth, inflation will continue for a couple more years and is not transitory in nature,” said Sharat Chandra, vice president of blockchain research and strategy. identity management platform based on EarthID.
“The Federal Reserve has a challenging balancing act: to reduce inflation without risking stagflation. If the Fed keeps raising interest rates, the recession will be imminent and will push the stock and crypto markets into a tailspin. Crypto markets will remain fragile and investor caution will persist,” he added.
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Rajagopal Menon, vice president of crypto exchange WazirX, said that the rate of inflation globally has been a major concern for investors. In the US, it is at a 40-year high at 8.6 percent and in the UK at 9 percent.
“Interest rate hikes in major crypto nations are also a growing concern as they reduce liquidity. Both indicators have led to a sell-off. In India, the central bank raised the full-year forecast for the FY23 consumer price index to 6.7%, which is higher than the target, and the Indian rupee hit a record low of 78.28. Therefore, investors have taken a wait-and-see stance as early indicators are in the red. We expect this bearish market trend to persist in the short term,” said Rajagopal Menon, Vice President of WazirX.
(Cryptocurrencies and other virtual digital assets are not regulated in India. They are considered extremely risky for investment. Please consult your financial advisor before making any investment decisions)