Since Bitcoin reached its all-time high in November 2021, it has crashed by 73% and dragged the rest of the crypto market with it. A few signs show that the crypto crash hasn’t reached the bottom, but the good news is that some coins are indicating a potential price pump.
Let’s look at the key metrics that signal the crypto market could dip lower.
1. Market Sentiment
When Bitcoin crashed to just under $18,000 in June 2022, most of the crypto market was in extreme fear. And it stayed that way for several weeks before Bitcoin recovered slightly. The Crypto Fear and Greed Index measures market sentiment by evaluating several metrics.
And currently, the market is still in fear. Many crypto experts believe that Bitcoin could crash further, and it seems that most of the market echoes that opinion. When the market is fearful, it tends to sell out of fear of lower prices.
2. Rising Interest Rates
Inflation has been a heavy burden on most consumers since global lockdowns. Not only has the price of gas risen drastically but so have everyday essentials such as food and hygiene products. One of the ways that the Federal Reserve has attempted to fight inflation is by raising interest rates.
It has incrementally raised interest rates since March 2022 and plans to continue to bring consumer prices down. When interest rates rise, the dollar becomes stronger. Investors see the dollar as a more attractive investment option, and they tend to exit crypto holdings and securities so they can hold more dollars to get a high return.
3. Recession
Several economists have warned about an impending recession. And they may be right considering that some cryptocurrencies and stocks have lost more than 70% of their value. Large corporations have laid off workers, and most people have less money due to inflation.
During a recession, people who have lost their jobs are desperate for money, and they tend to cash out their investments to get it. To pay their mortgage and day-to-day expenses, investors sell their crypto assets to fund their lifestyles.
