FX.co ★ Bitcoin is on the positive side not because of, but in spite of

Over the past week, the cost of bitcoin has increased by 5.5%, closing the trading session on Sunday at around $19,500. By the way, the last seven-day period was the first week of growth for bitcoin after three weeks of falling. So, from the second half of August and for the whole of September, the coin fell in total by almost 20% - from $24,400 to $19,800. At the time of writing, BTC is trading at $19,262.

At the beginning of the past seven-day period, the main cryptocurrency was confidently staying in the green zone and even easily overcame the $20,000 level thanks to the spectacular growth of US stock indices, but lost almost all of the growth closer to the weekend.

Since the beginning of 2022, analysts have increasingly begun to emphasize the high level of correlation between the US securities market and virtual assets amid intense anticipation by both of the consequences of the geopolitical conflict in Eastern Europe and further steps by the US Federal Reserve.

Earlier, analysts from the investment company Arcane Research have already stated that the correlation of BTC and technology securities has reached its peak since July 2020.

In addition, the day before, economists from the TradingView analytics platform said that the relationship between the cryptocurrency market and the US stock market reached 70% in the past quarter.

At the same time, an important factor in pressure on digital assets at the end of the week was the employment report from the US Department of Labor published on Thursday. According to the report, the number of Americans who first applied for unemployment benefits in September rose by 29,000 to 219,000 people. At the same time, the market on average predicted an increase in the indicator only to 204,000.

The report published last week, investors are certain, will become a reference point for the Fed in the strategy of determining the future path of the country's monetary policy.

By the way, the current fall in the cryptocurrency market is directly related to the monetary policy of the Fed.

So, recently, analysts from the analytics company Kaiko reported that BTC volatility significantly depends on the results of meetings of members of the US central bank.

According to analysts from Kaiko, a high correlation of bitcoin with the decisions of the Fed was recorded in the summer of 2021, which indicates that the cryptocurrency market has long been influenced by key macroeconomic indicators.

So, when in May 2022 the Fed raised the rate range to 0.75-1% per annum, the cost of the first cryptocurrency sharply overcame the level of $40,000, but on the same day it fell below $36,000, starting the process of a protracted correction.

In June this year, when the US central bank raised its key rate to 1.5-1.75%, bitcoin immediately reacted with spectacular growth.

Experts are confident that in the coming months, the digital asset market will respond even more strongly to the speeches of world central banks, because, often, an increase in the interest rate dramatically reduces the ability of investors to invest in risky assets such as virtual currency.

As for cryptocurrencies from the top 10 by capitalization, over the past week, the coins showed varying success. At the same time, the worst results were recorded by Cardano (-1.7%), and the best by XRP (+11.5%).

According to the world's largest virtual asset data aggregator CoinGecko, last week the total market capitalization of cryptocurrencies amounted to $985.36 trillion.

Since last November, when this figure exceeded the $3 trillion mark, it has more than tripled.

Forecasts of crypto experts

Since the beginning of October, analysts of the digital asset market have been sounding increasingly optimistic forecasts about its future. So, experts of the financial company DappRadar, said that in the third quarter of 2022, the cryptocurrency entered a long phase of consolidation.

The restoration of virtual coins, DappRadar is confident, began in September. At the same time, in the period from July to September, the value of digital currencies fell by 8.5%. The first signs of recovery appeared only at the end of last month, one of the most important events of which was the Ethereum update.

So, on the morning of September 15, the Ethereum network successfully migrated from the Proof-of-Work (PoW) algorithm to Proof-of-Stake (PoS), which does not require mining. The migration occurred as part of a major update to The Merge.

At the same time, in the first hours after the transition of ETN to the Proof-of-Stake algorithm, a powerful influx of altcoins to centralized exchanges was observed.

On the same day, the founder of the ETH network Vitalik Buterin confirmed its successful transition to PoS and the absence of failures or errors in the update process. By the way, earlier the Canadian-Russian programmer stated that the transition of the network to Proof-of-Stake will increase the popularity of digital assets for everyday payments by reducing the commission to 2 cents. According to Buterin, the popularity of crypto payments fell after 2018 amid high transaction fees.

To date, ETH continues to be the leader in the blockchain ranking in terms of the number of deployed DeFi projects. The value of funds in protocols placed on the basis of ETH exceeded $48 billion by the end of September.

Last week, the former top manager of the financial conglomerate Goldman Sachs, and now the CEO of Real Vision, Raoul Pal, also said that digital assets will see strong growth in the coming year.

The analyst explains his optimism about the cryptocurrency market in the long term by the global economic crisis and the merger of Ethereum.

So, Pal is sure that amid ETH migration to the Proof-of-Stake algorithm, miners who sell altcoins every day will leave the market. As a result, there will be a decrease in the volume of offers and $6 billion in Ethereum will disappear from monthly sales. In this case, the main competitor of bitcoin will be less prone to inflation.

In addition, the CEO of Real Vision believes that, thanks to the constantly growing demand, the decrease in the supply of ETH and the environmental problems of BTC, 2023 can be very successful for Ethereum.

However, among crypto experts there are those who do not believe in the recovery of bitcoin and its competitors in the near future. Recently, the CEO of Digifox, Nicholas Merten, announced that BTC is waiting for a collapse to $14,000.

The crypto expert came to this conclusion based on technical and macroeconomic factors. So, Merten is sure, the recent exchange rate movement of bitcoin may signal the end of a 10-year bullish cycle, after which the coin will cease to be a key asset compared to other commodities and stocks.

According to the crypto expert, the recent decision of the Fed on monetary policy may also be an important macroeconomic incentive to reduce the cost of the first cryptocurrency.

Recall that during the September meeting, the US central bank raised the key rate range by 75 basis points - to the highest level since 2008 - 3-3.25%.

The combination of the above technical and macroeconomic factors, according to the CEO of Digifox, will soon push bitcoin to the price bottom at $ 14,000. If the coin collapses to these values, its correction will be 80% of the historical record of $69,000.

As for the future of bitcoin's main competitor, the Ethereum altcoin, Merten assumes that the cryptocurrency will retest the $800-$1,000 range, and in the worst case, the quotes will fall even lower.

Meanwhile, analysts from the analytics company Glassnode are confident that in the near future bitcoin will continue to trade in the range of $17,000 to $25,000. At the same time, the tight monetary policy of the Fed and other world central banks, as well as the negative macroeconomic background, neutralize all important positive events related to the virtual asset market.

A well-known expert in the field of cryptocurrencies, Ton Weiss, recently stated that fans of the BTC should prepare for a sharp drop in the coin. At the same time, the upcoming collapse of the asset will be "the last powerful decline before growth," Weiss is certain. Quotes will drop to $14,000-$15,000, where the ideal entry point for purchases will open. The capitulation of bitcoin to the specified lows, the analyst admits, may happen in the near future.

Of course, the crypto expert adds, such a loud decline in the leader of the virtual asset market will provoke a drop in the rates of other coins.