In crypto a new year never ceases to surprises. With Crypto in full swing and hopes high for ATH in October and November, the resulting December and start to January have been a letdown for sure. Since December 27, 2021 to present, Bitcoin has fallen in price by more than $10,000 USD per coin, and the rest of the cryptocurrency market has followed suit sheading over $300B USD in total crypto market cap, in that same time. The crypto market has reached high levels of fear on the Fear and Greed index, and on Wednesday the Federal Reserve accentuated the downside by releasing minutes from December that recorded their intention to move up the timetable for interest rates increases, to mid-March. An obvious move in the face of present inflation numbers. The effect this information had on sentiment in all investment markets was clearly visible via substantial red candles across the board.
The minutes explored measures by the Fed to reduce their support in the traditional financial markets starting in March. It was an expected move and is necessary with spiraling inflation numbers. Crypto continues to show a strong correlation to traditional investments and is naturally reacting with higher levels of volatility to the downside. Other crypto news items like Bitcoin mining bans in Kosovo, Internet outages in Kazakhstan, seasonal investment trends and practice of booking profits are also a go to reasoning for late December downward shifts in crypto prices. These topics have added to fears, but the true culprit is crypto's correlation to traditional investment markets and news, with ongoing troubles.
Crypto veterans will know by experience that this kind of volatility is good for the market, and in future will be recognized as a great buying opportunity. Pullbacks do in fact shake out weak hands and build a stronger foundation. It is also always encouraging to see that bottom grow. Crypto continues with exponentially increasing adoption, delivering new opportunities daily, and this downside will look microscopic in time from certain higher highs.