- Boring price movements back and forth
- The purchase feeds itself
- A mainstream market event
- State intervention
- A big hack
After a correction from all-time highs on Nov. 10, 2021 and a bottom on Jan. 24, 2022. Since then, the top two cryptos have settled in a trading range.
Bitcoin set $40,000 as the pivot point Ethereum traded from $3,000 per token on both sides. while the market capitalization While the asset class was around $1.8 trillion, the number of new tokens entering the market has steadily increased. By the end of last week over 19,200 were competing cryptocurrencies about capital.
After the wild price volatility of the past few years, prices have stabilized. Price stability is a sign that the asset class is maturing. As liquidity increases, price variance tends to decrease.
Still, cryptos were . However, the potential for another spate of explosive and implosive action could be looming. Recent trading ranges suggest that the top cryptos are tightly coiled springs that will eventually break higher or lower, and wild price swings may return.
This is what awaits you in this article
Boring price movements back and forth
Bitcoin has been trading either side of $40,000 since late January 2022.
Source: bar chart
As the chart shows, the price has traded from a low of $33,076.69 to a high of $48,187.21 with an average of $40,631.95. While the leading crypto traded just below the $36,000 level late last week and is currently trading at $33,565, the $40,000 was a turning point where the price has consolidated since the Jan. 24 low.
Source: bar chart
The chart above highlights Ethereum from $2,163.316 to $3,579.866 per token since late January, with an average of $2,871.591. At the time of writing, it is trading at $2,451.42.
While hitting the $3,000 level at Ethereum’s pivot point, the token has traded either side of the $3,000 level since hitting the low in late January.
The purchase feeds itself
The spectacular rallies for Bitcoin and Ethereum over the past few years fueled a speculative frenzy that came to a head on November 10, 2021. The correction and price consolidation have tempered the market’s enthusiasm as many speculators have been marginalized.
A move above the $48,200 level in Bitcoin and the $3,600 level in Bitcoin Ethereum would be a technical breakout and could see buyers flocking back into the cryptocurrency arena. The bullish sentiment would be rocket fuel for the asset class as trend-following speculators return to cryptocurrencies as buying will attract more buyers.
But cryptos seem to be waiting for a trigger that would fuel the next rally. Here are 3 options:
1. A mainstream market event
In late 2017, the launch of at CME pushed the token price to the $20,000 mark for the first time. The listing of exchange Coinbase (NASDAQ:) on the NASDAQ in April 2021 drove prices higher. Events that increase the reach and visibility of the asset class tend to push prices higher.
Some of the events that could be emerging are the growing adoption among retailers and suppliers who accept and encourage payment with cryptocurrencies. High-profile investors like Elon Musk, Jack Dorsey, and other tech moguls have led to higher prices as market participants follow market leaders.
The current weakness in prices follows Berkshire Hathaway’s (NYSE:) recent rally in Omaha, Nebraska. Warren Buffett and Charlie Munger are not fans. Mr. Buffett said he wouldn’t pay $25 for all the world’s bitcoin, and Munger called cryptocurrencies “stupid and evil.”
The comments of these closely followed and hugely successful investment managers cast a new dark cloud over the asset class.
2. Government intervention
Mr. Munger’s comment reveals the underlying problem cryptos face. He qualified”angry,” Saying, “it undermines the Federal Reserve System.” Governments are not fans of cryptocurrencies as they threaten control over the money supply, taking it away from government and giving it back to individuals.
Cryptocurrency supporters who embrace the mediums of exchange libertarian ideology agree with Munger but support undermining the Federal Reserve System. Charlie Munger hit the nail on the head by identifying the ideological divide between cryptocurrency advocates and critics.
On the one hand, the development of the fintech revolution favors cryptos. On the other hand, traditional financial institutions and governments reject it as it eliminates them from the equation.
Messrs. Buffett and Munger, government officials and traditional financial firms would likely agree that the Blockchain-Technology that improves efficiency, transaction speed and record keeping. However, they want to take the tokens themselves, the actual cryptocurrencies, out of the equation.
Munger noted that the leader of the world’s second largest economy, Xi Jinping, “smart enough to ban Bitcoin in China.” Government intervention continues to pose the greatest threat to the asset class.
3. A big hack
The Russian invasion of Ukraine, sanctions and retaliation threaten a widening economic war with the US and Europe on one side and China and Russia on the other. The ideological split created by the Sino-Russian “no limits” Support agreement amounts to an economic struggle between the two sides.
Hacking computer systems is an integral part of modern cyber warfare. The rise of the cryptocurrency asset class makes it an attractive target for hackers looking for computer wallets. Russia, China, North Korea and Iran have hacked computer systems around the world. Ransomware payments are usually demanded in hard-to-trace cryptos.
Any significant hack of a crypto platform would scare market participants away from the asset class, as was the case in 2014 when Japan’s Mount Gox exchange went bankrupt after losing 740,000 of its customers’ bitcoin along with 100,000 owned by the company.
That was in 2014 all-time high However, Bitcoin is over 30 times below its current price. A hack now would be a major blow to the asset class.
Cryptocurrencies are consolidating above the late January low, well below the record highs set on November 10, 2021. It appears that the asset class is waiting for the next significant event to propel cryptos one way or the other – either to higher highs or lower lows.
The longer the consolidation lasts, the more substantial the eventual move will be. Cryptos will undoubtedly move at some point, but the direction will depend on the type and quality of obstacles encountered on the path to fintech evolution.
Source: Crypto News Deutsch