- The crypto market continues to be in steep decline as the year comes to a close.
- Fed actions and institutions may be responsible for the recent dip in prices.
- This is an unexpected end to what has been described as crypto’s best year.
Bears continue to dominate the crypto market as prices falter again. A glimpse at the 7-day crypto prices on the crypto price tracking website CoinMarketCap will leave you with an interface painted in red.
Red In The Crypto Streets
The global cryptocurrency market that almost reached a total market cap of $3 trillion in November, now has a market cap of $2,209,498,336,141 according to CoinMarketCap. It is a drop of about 27% from the previous peak.
Bitcoin, the most dominant cryptocurrency, lost about 7.2% of its value yesterday. It currently trades at around $47,996 as experts brace themselves for a harder slide. A similar fate was shared by a majority of the altcoins, including the likes of Ethereum, Solana, and Polkadot.
Over the last two days, around $200 billion has been wiped off the market cap of the emerging market. Coinglass data shows that in the last day, over 165,000 traders had converted their digital assets to fiat. It is likely that this move has contributed to the sharp decline in recent days.
Talks of the Fed shutting down certain stimulus programs and possibly considering tapering to get a grip on inflation may be quelling the risk appetite of certain market speculators. It remains unclear just how much influence the actions of the Fed will have on crypto prices like Bitcoin, but it may certainly reduce the number of investors putting money into cryptocurrency assets in order to maintain the value of their assets in the face of inflation.
Despite recent instability, Matt Maley, chief market strategist for Miller Tabak & Co., said it’s surprising to see cryptocurrencies falling off as the year draws to a close because many have been major winners in 2021. However, he believes institutional investors are to blame for this week’s losses.
According to Maley, many people may have gotten into the market while it was already moving. “Their gains in cryptos are not as large — in fact, some of them probably have losses,” he said. “As a result, they might be paring back their holdings a bit and increasing their exposure” to other instruments such as equities, he added.
No Fairytale Ending
Many crypto analysts would not have predicted this end of the year for the nascent market. 2021, despite the recent dips, has been a good year for cryptocurrencies. However, a lot of price expectations have been shot down and are no longer feasible for this year.
Many experts have touted astronomical price gains for crypto this year, with Standard Chartered expressing confidence that Bitcoin would get to $100,000 in September.
In May, Kaspar, an analyst, tipped Ether to reach $10,000. She hinged her prediction on Ethereum switching to proof of stake for block validation and becoming a green network. These network changes may bring Ethereum to a trillion-dollar market cap, which is where bitcoin is right now — that would put ethereum at roughly $8,000 to $10,000 per coin.
Though these predictions have not come through, the crypto market has seen enormous gains in 2021 and several experts are positive that the streak will continue.