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Cryptocurrencies - Will Growth Continue?

Cryptocurrencies are on track to complete a bullish week which have been few and far apart so far this year. Over the past 5 days the price of Bitcoin has increased by 11.57%, Ethereum by 13.41%, Bitcoin Cash by 2.88%, and Dogecoin by 2.80%. Some of these figures seem to indicate a strong bullish trend but traders should take into consideration the volatility of the cryptocurrency market.

The price movement over the past week has actually not formed much more than a medium-term retracement. This also applies to Ethereum which has increased by over 13%. The value of the cryptocurrency market has decreased by up to 73% since November of last year, and has formed 3 major retracements including the current week. Cryptocurrency traders will be monitoring the price movement to determine whether the climb will continue to form a medium-to-longer term bullish trend. However, so far the price movement has only formed a 28% retracement compared to the most recent bearish price swing.

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Economists are contemplating as to what has driven the price to increase and influenced traders to return to the cryptocurrency market. Currently, the picture has not changed in terms of the risks of recession nor the strong interest rate hikes over the coming months. This has been the major force, influencing sellers over the past months.

One possibility for the renewed crypto enthusiasm is that traders are entering the market for technical reasons. The price had been massively discounted for a while and investors may be trying to take advantage of the lower price. Currently the total crypto market capitalization has reached $970 billion, and Bitcoin’s share has slightly increased to 43.3%.

According to Bank Of America's latest report on the market, the number of active users has decreased by half from 1 million users in November of last year, to approximately 500,000 this month. Furthermore, if a recession does materialize, it could further pressure the price of cryptocurrencies as the risk appetite and investor confidence continues to decline.

Another issue has been the cryptocurrency market’s liquidity crisis. The Singapore cryptocurrency hedge fund known as ‘Three Arrows Capital’ was discontinued, and the broker Voyager Digital, which served almost 100,000 clients, also announced its liquidation. Meanwhile other companies have temporarily suspended withdrawals due to extreme market conditions and high volatility.

However, even while taking the above into consideration, throughout the week we can see that the price has declined, and it is, without a doubt, not the first time that the cryptocurrency market has seen strong declines. Investors have waited for the market to bottom out, before purchasing and pushing the market higher again, on many occasions over the past few years.

IMPORTANT NOTICE: Any news, opinions, research, analyses, prices or other information contained in this article are provided as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and therefore, it is not subject to any prohibition on dealing ahead of dissemination. Past performance is not an indication of possible future performance. Any action you take upon the information in this article is strictly at your own risk, and we will not be liable for any losses and damages in connection with the use of this article.
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