Is the Bottom in For Bitcoin and Crypto?

The global crypto market capitalization is firmly under the £800 billion ($1 trillion) market mark. This weekend, Bitcoin dropped below its 2017 highs, briefly trading as low as £14,572 ($17500). However, the market has witnessed a rebound since the weekend lows, pushing Bitcoin back above £16,300 (appr. $20,000).

For onlookers, one of the biggest questions is whether the bottom is in and whether the crypto market will continue to flourish from this point onward. Will cryptocurrencies rebound back to last year’s highs anytime soon?

(Source: Bitcourier)

Recent lows look set to be the bottom for Bitcoin and the crypto market, at least in the short term. For one thing, the recent developments that led to the market sell-off have been relatively addressed. 

Factors Leading to Crypto Market Drop

The loss of the nearly $30 billion Terra LUNA ecosystem and the project’s continuous Bitcoin selling triggered the recent sell-off. Over time, several crypto-related companies, notably Celsius and Three Arrows Capital (3AC), have been adversely affected by the Terra collapse, leading to the loss of billions.

As both companies have relatively steadied the ship and are now devising measures to refund customers and partners, calm has returned to a market primarily held captive by fears of a more liquidation-induced sell-off. 

Meanwhile, the crypto market has also shown little immunity to ongoing efforts by central banks such as the U.S. Federal Reserve to curb inflation. Historically, measures such as interest rate increases on government-issued bonds have spelled doom for risk-prone assets. This contagion has spread to cryptocurrencies and the broader financial market, leading to continued decline. Key stock indexes such as S&P 500 and Nasdaq 100 are down 23% and 31%, respectively, on the year-to-date (YTD) chart.

Although the recent decline might provide short-term relief, macro conditions will likely need to stabilize for cryptocurrencies to witness any significant uptrend. After a tremendous bull run in the past year, a return to previous highs may not be on the cards, at least not anytime soon. 

However, historical performance suggests that most leading cryptocurrencies will eventually bounce back and perhaps surge past their previous highs. Would the current market conditions be an ideal opportunity for prospective long-term investors? Only time will tell.