21.01.202216:03 Forex Analysis & Reviews: Crypto market collapses in 24 hours due to US and Russia news

Bitcoin sank by more than 7% to $38,5774 in the past 24 hours, while the second-largest virtual asset, Ethereum, fell by more than 8% to $2,809.51. At the same time, the overall cryptocurrency market lost about $147 billion.

At the time of writing the article, bitcoin is trading at $38,093, while the price of Ethereum reaches $2,782. Bitcoin has declined sharply since November 2021. At that time, the coin hit a record high of $69,000. However, since then, the first cryptocurrency has lost more than 40%.

Exchange Rates 21.01.2022 analysis

Crypto experts consider the correction of the US leading stock market indexes to be the main reason for a dramatic decline of digital coins. Thus, the high-tech Nasdaq lost about 5% since the beginning of the week, while the S&P 500 has been falling for the third week in a row.

Traditionally, the sentiment of the cryptocurrency and stock market has a mutual influence on their dynamics. For example, a significant drop in the value of bitcoin could encourage investors to be risk-averse and could lead to a reduction in investments in the securities markets.

Besides, in the coming year, the BTC dynamics is identical to the movement of the largest stock index NASDAQ Composite, formed from the shares of technology companies. The NASDAQ has lost 9.5% since early 2022 and entered the correction phase.

The negative dynamics of Wall Street is the result of the market participants' concern about the US Federal Reserve's interest rate hike.

As a result of the Federal Reserve's tightening of monetary policy at the beginning of the current week, US government bond yields soared overnight. Moreover, the rate hike forced investors to abandon positions on risky assets.

Among the Fed's planned steps are curtailing of bond purchases and increase in the benchmark interest rate. In anticipation of these measures, analysts have opposing views on the future of bitcoin.

Pessimistic crypto experts argue that the highly inflated BTC bubble will soon burst amid increased regulatory scrutiny. For example, the PRC has completely banned any transactions involving virtual assets. The US authorities are also tightening control on certain areas of the cryptocurrency market.

Other analysts predict digital gold to fall below the level of $40,000 amid the publication of a report by the Central Bank of Russia. The Central Bank of Russia proposed banning the use and mining of cryptocurrencies on the territory of the state. It stated that the widespread distribution of digital assets posed risks to financial stability and the sovereignty of monetary policy.

Notably, Russia is currently one of the top three leading countries in mining BTC.

Irina Maksimova,
Analytical expert of InstaForex
© 2007-2022
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