Bitcoin
prices are moving sideways amid a lack of significant directional drivers in
the crypto and traditional financial
markets. The overall negative picture which has been painted with a bearish
trend is intact and Bitcoin prices may plunge to $15,000 per coin in the foreseeable
future.
A possible
Credit Suisse meltdown may put enormous pressure on digital assets as
institutions are likely to firstly dump risky assets in the case of severe
financial troubles. Credit Suisse stocks have fallen by 20% over the last two
weeks, and by 60% from the beginning of 2022. The major reason is the loss of four
billion Suisse francs during the last three quarters. Analysts are more
apocalyptic regarding the next Q3 2022 earnings report that is expected to be
released on October 27. Credit Suisse CDS (credit default swaps) surged above
250 points, a record high since 2009. Archegos Capital and Citrix cloud
computing company largely contributed to the financial deterioration of Credit
Suisse.
However, it
is not the only European bank to suffer from worsening financial conditions. Shares
of Deutsche bank fell sharply after the North Stream 1 and 2 pipelines blasts
and the fears that manifested from this about a possible recession in the German
economy. The situation concerning large financial institutions would certainly
impact European and global financial markets. Long-lasting quantitative easing
policies implemented by major central banks led to a relaxed financial policy
of large financial institutions that had access to cheap funds that allowed
them to increase debt. Now they are struggling to refinance the debt amid rapid
interest rate hikes. At the moment there are no reasons for panic as central
banks like Swiss National Bank are likely to support troubled large financial
institutions. But further risks of a mortgage crisis due to rising interest
rates may weaken the entire financial system.
Something
of that sort happened in 2018 when the Federal Reserve (Fed) and the European Central
Bank (ECB) were trying to curtail their QE programs and tighten monetary
policies. Bitcoin prices reacted with a decline by 60% or by $6,000 by summertime
and continued to drop, reaching $3,000 in November. Now the situation looks
similar and further rapid deterioration of the crypto market should not be
excluded. Bitcoin may reach $8,000 during the current downside correction.
Some
digital assets have already lost more than 80% during this crypto winter. Coins
like SOL, DOT and AVAX are the bright examples of such drops amid weakening major
cryptocurrencies. Ethereum seems to be much stronger, but in the current
financial circumstances it is rather a question of time as ETH may perform a
larger downside swing. BTC is now trading close to the lows of mid-2021, while
ETH prices are 25% above those lows. Even the second largest digital currency
has no abilities to resist the overall market correction for a long time. ETH
prices may drop to $700 per coin.