Bitcoin
prices dropped below $18,000, the lowest since 2018. Low liquidity over the
weekend and the absence of options to deposit money into trading accounts make
the market very vulnerable. So, when BTCC ETF decided to cut its balance by
24,500 BTC, prices immediately dropped. The more prices go down the more
investors lose money on open trades, and thus the desire to close trades
becomes stronger. The market has witnessed the financial troubles of several
crypto projects like Celsius, 3AC, and others. And this is likely not the end
of the bumpy, downhill road, as forced coin sell-offs will only contribute to
the slide.
The
pressure seriously mounting as the turbulent global economy together with
monetary tightening has revealed the fragility of the crypto market. Falling
liquidity and the declining appetite for risks has not only hit stocks but also
the crypto market despite all the talks about the new alternative monetary
system that could be established with cryptos. The most painful reality is that
institutional investors that joined the bullish market are not there to make
long-term passive investments. As soon as the Federal Reserve (Fed) started to
draw out liquidity, hedge funds immediately went short, withdrawing money from
the market without any attempts to support it at the seemingly new dips.
Cryptoenthusiasts
cannot be considered as true investors as they turned out to be a bunch of
people who were lucky enough to buy low and sell high in the bullish market.
Investments that were making profit were rather chaotic and that was appropriate
for the booming market. Any debates over digital gold, strong resistance levels,
or 200-days moving averages that were depicting the position of the market then
are seen rather inadequate now. The only cycle that is truly important is the
monetary cycle of the Fed that may reverse the market in one click.
The most convincing
proof that the crypto party is over is the withdrawal of fiat money from Tether
accounts that leads to USDT burning. At the beginning of May the USDT market
cap topped $83 billion, while later in June it dropped to $67 billion. However,
it would be wrong to put the blame only on this for the drop as the ultimate reason for the market
decay is clearly defined in the documentation of the Tether protocol. So, it
should not be a surprise for anyone.
Without any
positive developments on risky assets that could be tracked by the Nasdaq index,
the crypto market cannot deliver any
positive dynamics. Digital assets will only start to rally when investors are
ready to start a super risky gamble, just like in 2020 when the Fed pumped
liquidity into financial markets. We may see a slight rebound of BTC prices
after a 12th consecutive downside week. However, it is unlikely that it may
return above $22,000. If prices do not reach this level then they will fall
even deteriorate further.