these 5 events that could put an end to the bear market
Between the decisions of the Federal Reserve and the merger, the next event that the community has long awaited, what are the elements that could lead to the growth of the cryptocurrency market?
For the past few months, the cryptocurrency market has entered a so-called “bear” phase, also known as a bear market. This is not the first time: the market, very volatile, has already experienced many falls in recent years, especially in 2012, 2015-2016 and 2018-2019. The crypto-crash of 2022 appears to be the most violent bear market for the cryptocurrency ecosystem, as Glassnode recently reminded in a note.
After each crash, the cryptocurrency market went on an upward trajectory, the disappearance of certain cryptocurrencies that were too fragile and the confirmation of certain other cryptocurrencies or players in the ecosystem. Bitcoin, which is still the king of cryptocurrencies in terms of capitalization according to Coinmarketcap data ($391 billion), reached an all-time high in November 2021, at $69,000. At the time of writing, it is close to $20,000, weakened after two recent crypto crashes. Will it be able to go uphill and drag the entire market into a “bull” market (bull market)?
According to a CoinTelegraph article, five elements could end the bear market situation.
• FED decisions
This is no longer a surprise: for several months, bitcoin – which generally drives all cryptocurrencies down or up – has been increasingly linked to traditional financial markets (mainly the Nasdaq), which react to central bank announcements.
Indeed, tech stocks and cryptocurrencies are among the most sensitive assets to central bank policies, particularly the US Federal Reserve (Fed). Overall, throughout 2020 and 2021, there was strong liquidity in the markets injected by central banks to support economies amid the pandemic.
This led to the rise of the cryptocurrency market and the Nasdaq and other risky assets. But the year 2022 is different and the economic context has changed: the Fed has indeed started raising its rates (0.5% and 0.75%) to fight inflation.
Faced with the tightening of the US central bank’s monetary policy, investments in the riskiest assets are falling. There is less money in circulation in the financial markets, and this is punishing the Nasdaq, and thus cryptocurrencies.
On July 26 and 27, they will make a decision on the further increase of interest rates, which will actually affect the price of cryptocurrencies.
• Adoption of bitcoin by major powers
Another macroeconomic phenomenon is related to the adoption of Bitcoin as legal tender in certain countries, such as El Salvador and more recently the Central African Republic.
“Its adoption by such small players on the world stage has done little to promote wider acceptance. That would likely change, however, if a larger market like Japan or Germany opened up to officially promoting the use of BTC by their citizens for their daily purchases”, the media underlines.
Major international powers are thinking more about launching a central bank digital currency (MDBC) than adopting bitcoin.
• Integration of cryptocurrencies as means of payment
According to Coinmap, 29,700 companies currently accept bitcoin worldwide. However, there are still a few big American brands that accept this type of payment such as Paypal, Subway or Cupa Cafe.
“While there are options for accessing value stored in crypto, such as debit cards and online payment integrations with platforms such as Shopify, the ability to make purchases through a direct transaction on the network’s blockchain is relatively limited. It is likely that the integration of crypto payments by large companies like Amazon or Apple could cause a bullish wave,” according to CoinTelegraph.
• Ethereum event: merge
There is a long-awaited event within the crypto ecosystem, known as the Merger (see our article on this topic), which should take place by August.
In particular, the Ethereum blockchain (which has its own currency, ether, the second currency by capitalization after bitcoin) would move from the so-called “proof of work” process to “proof of stake” process. stake). Such a change would not only mean that ether would no longer be the result of a so-called mining process in the same way that bitcoin would be put into circulation, but this new process would also be much less energy intensive. Likewise, this change should reduce the emission of ether in traffic, which would mean that with a limited amount of ether, the demand for ether could be higher.
So far, the transition process, which has been in the works for years, has been delayed by several months. The community hopes that this will actually happen in August, as announced by Ethereum head Vitalik Buterin.
“It’s possible that the hype surrounding The Merge could help pull the crypto market out of its bearish state if the transition goes smoothly, especially if it contributes to greater scalability and a faster user experience,” CoinTelegraph opined.
• Creation of a bitcoin spot ETF
Another event was highlighted, the creation of ETF (Exchange Traded Funds) known as bitcoin spot in the US markets. As a reminder, an ETF is an exchange-traded index fund that tracks the evolution of a stock market index (or one or more financial assets, such as gold) by repeating price rises as well as falls. of this index (or of this asset).
Proposed in 2017, this type of project has never taken off until now.
“The reasons for this rejection largely revolve around accusations that cryptocurrency markets are easily manipulated and that adequate safeguards are not in place to protect investors. If a spot ETF were to be approved, it would do away with this long-standing objection and bring a new level of legitimacy to bitcoin and the crypto asset class as a whole,” the release said.