Cryptocurrencies have yet again come under massive selling pressure as token values have fallen well below critical levels. On Thursday, Bitcoin, the most highly valued cryptocurrency token, fell down to $25,400, lowest since December 2020, before recovering to $30,806 during Asian trading hours on Friday.
Ethereum plunged below the $2000 dollar mark on Thursday, reaching $1704. Ethereum also saw recovery during Asian trading hours, reaching back to $2126.
It is to be noted that these values are well below the critical values decided by trading patterns. It is generally accepted (Though the exact value is volatile) that the critical value for Bitcoin, below which massive collapses are predicted, is $40,000.
Inflation has been on a steep rise all around the globe, with the latest numbers standing at 8.3% for the United States. The federal reserve has been proactive in combating the issue, as interest rates have been increasing periodically, leading to a market squeeze.
In a situation of one-amplifies-the-other, a stablecoin token TerraUSD, has collapsed horrendously below the US dollar, which has caused even more selling pressure on cryptocurrencies. Stablecoins are like a middle ground between fiat currencies and cryptocurrencies. They are usually backed by a commodity, currency, or a regulatory algorithm. TerraUSD’s algorithm is tied to the free flowing token Luna, selling pressure on which caused Terra’s value to plunge to 9 cents, scarily below its usual 1:1 ratio with the US Dollar.
Bitcoin has displayed a triangular pattern trend. This trend is representive of a strong competition between the bull and bear markets (The buyers are optimistic about the asset’s value increasing, the sellers are optimistic about the asset’s value decreasing.) This competition shows a general trend, where at a lower prices, the buyer optimism drives the price up, and at a higher limit, as buyer demand declines, sellers can push the price down. Since both markets have solid confidence, the limit at which both sides affect the asset’s value keeps converging closer to the other side. (The buyers invest more at a higher price, The sellers short-sell more at a lower price). These limits for bitcoin are currently predicted at $36,500-$47,500, according to Jeffrey Halley, Senior market analyst. When an asset falls through any of these limits, its value catches a severe uptrend or downtrend, with one side losing confidence.
As the cryptocurrency market has been in a slump, Bitcoin maitaining a $40,000 mark is key, since it’s decline below $36,500 could result in a further $18,000 predicted crash caused by market panic and selling pressure.
Since cryptocurrencies saw a lot of hype around them over the past few years, a significant portion of investments include ones that aren’t necessarily well analysed and hence lead to an increased selling pressure during times of adversity.
