The total bitcoin and crypto markets have lost around $ 1 trillion since November, creating turmoil for traders.

BTC price has fallen from a high of nearly $ 70,000 less than 2 months ago to nearly $ 42,000 today – a decrease of about 40%. Meanwhile, other major cryptocurrencies like ETH, BNB, SOL, ADA, and XRP suffered similar losses.

The total market capitalization of cryptocurrencies dropped from $ 3 trillion to $ 2 trillion after a period of strong growth of just $ 200 billion 2 years ago. Still, bullish traders believe this latest crash is only a temporary setback.

Mikkel Morch, risk manager at crypto hedge fund ARK36, said:

“The recent decline in the digital asset market is clearly no surprise. We previously warned of turmoil in the market and weakening technical fundamentals, which could lead to a decline to the lows of $ 40,000. “

BTC / USDT. Source: Tradingview

Nicholas Cawley, Strategist at DailyFX, commented:

Bitcoin recently broke correlation with the stock market, missing the rally in late 2021 / early 2022. If the price breaks the December 4th low by $ 42,000, it will see a series of lows in late September between $ 39,600 and $ 40,700 US dollars reappear. “

The most recent drop in prices, which wiped billions of dollars off the bitcoin and crypto markets in a matter of hours, came after the US Federal Reserve announced that it could accelerate interest rate hike plans in 2022 and began its massive balance sheet to shrink – something that had a huge impact on the stock market.

Morch shared:

“Following the release of the minutes of the Fed’s December meeting, which indicated a more drastic move to reduce expansionary monetary policy to fight inflation, negative investor sentiment caused Bitcoin to lose ground. Once that support was broken, liquidation took place within minutes. We have clearly been in a downward trend for a few weeks and a decisive turnaround is not in sight. “

The price collapsed after about 6 months since BTC was hit hard by the crypto raid in China and confidence was put down due to the “turning of the wheel” by Tesla CEO Elon Musk. Bitcoin price hit a low of $ 29,000 in late July before rebounding and rebounding from the previous high.

According to Morch, there are “noticeable similarities between the current price development and the market from mid-May to August, which give cause for optimism, but medium-term caution. An increase of $ 47,000 over the next few days could confirm this thesis, while further losses will invalidate it. In any case, only a sharp break above $ 50,000 signals a sharp turnaround and investors should be aware of the inherently volatile nature of the digital asset market.

Bitcoin and other crypto investors are not afraid of the recent downturn and are confidently predicting a “strong recovery”.

The Fed triggered an “immediate sell-off in Wall Street and crypto markets as some traders saw such a move risk liquidity that has benefited many asset classes,” including Bitcoin, “said Nigel Green, chief executive officer of the Financial advisory and asset management firm deVere Group said in email comments.

“However, I believe that we will see a strong rebound in Bitcoin when the situation calms down. This will then boost other assets in the crypto market “- such as ETH, BNB, SOL, ADA and XRP -” as Bitcoin and other widely used currencies are viewed as protection against inflation “.

Over the past year, ETH and its biggest rivals BNB, SOL and ADA outperformed BTC. Despite the recent crash, the ETH price has risen 165% year-on-year. SOL, currently the fifth largest cryptocurrency by capitalization, is up 6,500% compared to January 2021.

ETH / USDT. Source: TradingView

DailyFX’s Nicholas Cawley commented:

“Not only has Bitcoin underperformed in the crypto space in the past few weeks, but a large number of altcoins have made huge gains. Bitcoin’s market dominance is now only 40% lower than it was last year at this time.

While many BTC and crypto investors are confident that the market will rebound, others insist that persistently high volatility is an issue that needs to be addressed.

AJ Bell Investment Manager Russ Mold said via email:

“Regardless of the value of a cryptocurrency, such violent fluctuations will prevent it from displacing traditional currencies in the foreseeable future.”

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