Bitcoin has had a rough couple of days. That period brought it down to its lowest price level since July 2021. Other altcoins did not fare any better, with many recording the biggest drop in value for nearly a year. All of this is not taking place in a bubble, which is to be expected from the crypto market that is more and more aligned to the traditional stock market movements. Around crypto, the larger economic meltdown is happening as well. That is why many stock market news outlets reported that the fall of the cryptocurrencies happened along with the slide of things like tech stocks.
This charted yet again the course of the crypto markets, which are now clearly moving in lockstep with the stocks and other assets. One of the reasons for that synch is the fact that many hedge fund managers and family offices began investing in the crypto space. However, these are much more likely to also sell the same investments as soon as market volatility ramps up than to hold them. That in turn, like so many factors, adds to that overall sense that the market could enter a prolonged crypto winter yet again. If that happens, the crypto world will be once more in a territory that is both charted and uncharted, all at the same time.
The blockchains of ethereum and bitcoin are open markets that allow anyone, from huge crypto whales to individual esports players and others interested in these tokens to invest money in them. They are also experiments and thus combine computer systems and financial mechanisms, which also exist in an array of cultural, social, and economic activities. In many ways, they are similar to the internet itself and offer an ecosystem that is much bigger than its simple technological implication.
All of the crypto-relevant factors are evolving all of the time and changing not just individually but also in relation to each other. That is why the drops in prices like the recent crypto crash are regular occurrences and something that cuts through all of the changing factors in an ever-changing, ever-same manner. However, that does not change that the processes that lead to crashes are visible to analysts and others active in the same domain. They also offer some important patterns that can define future market movements.
Cryptocurrencies appear incredibly complex and diverse, sometimes a line to either jump high or drop low. But still, crypto is too often seen as a game of retail. Users buy bitcoin tokens – or any other ones for that matter – and do it through some third-party provider. These can be traditional banks, trading apps similar to Cash App or Robinhood, or trading brokerages. There are no advising requirements for the same purchases or any kind of pre-approval. That is a deal that many people willingly take on. Through it, they stand a chance of making money, but also an equally big chance of losing the same funds quickly and rapidly, or over a prolonged period of time.
Regardless, the same potential is available during good times and bad times alike. Some investors use the dollar-cost average, where they make small consistent purchases of crypto over a long time period and avoid the whole concept of timing the ups and downs. Others move in quickly and try to hit the high and low notes of the market movement. But, no matter what, they are small retail investors, but the markets move from the decisions of big players.
Whales and Institutions
Besides the small retail investors, there are also the massive players engaged in the crypto game. These are both institutions, meaning companies, and individual investors who command tens if not hundreds of millions of USD. When these make their plays, the markets feel it immediately, as huge amounts of money move in or out of the crypto ecosystem. Some of these players are household names in the cryptosphere. They include brands like Alameda Research, Tesla Motors, and MicroStrategy, just to name a few. With these, it is hard to tell who is winning money and who is losing it, as the initial positions of the market participants are not clear. In the most recent crypto price drop, the clearest indication is the fact that the volume of trading remains low.
That shows that big players are staying away from the markets even when they fall down drastically as they did in the previous week. A big indicator of all of that is the fact that institutions and whales alike believe that the market still needs to go down further. There are no certainties in that of course, but the very lack of presence of these crypto market entities is actually enforcing the same narrative – their money is needed to kickstart a market recovery and they are holding out believing there will be no market recovery anytime soon.
Crypto Winter 3.0
The movements of the market recently show a pattern that is consistent with a previous couple of crypto winters. That does not mean that the markets will fall down further or stay down for months or even years. No one can tell that for certain in any case. But, what is clear is that the appeal of the crypto market, like any other risky asset, is going down drastically. That has to do with the overall atmosphere in the global world of finance, which is burdened by worries about macro influences.
These include first and foremost the ongoing war between Russia and Ukraine, where countless lives are lost daily and the global economy is only starting to suffer because of that. Giving any advice at the same time is more than difficult and unforgiving for anyone who dares to make it. But, many who have cryptocurrencies on their hands will keep holding them, mainly as the same decision kept them afloat in the previous crypto winters. The same ebb and flow seem to be unfolding now as well.