US rate hike spurs demand for crypto

- BTC eased from 18-mth low

- Altcoins rally further

- Crypto market stabilises after a tumultuous week

- Despite bearish mkt, slight recovery is evidence of the continued optimism of the long-term value of digital assets

Mumbai: Even as the price of crypto currencies continues to crash, investors find themselves in a bind.

Bitcoin (BTC) was trading at approx $44,000 in the beginning of March and has now dropped to approx $20,000. Not to mention that BTC's ATH is $69,045. Bizz Buzz interacted with a galaxy of stakeholders to understand the reason behind it and the way forward.

In hopes of dampening inflation, the US Federal Reserve hiked benchmark interest rates by 0.75 per cent, the highest in 28 years, igniting fears of its broader global ramifications. Bitcoin rallied shortly after the announcement, peaking above the $21K mark and reinforcing its position as a notable asset to hedge against times of uncertainty. Noting some recovery from the world's largest cryptocurrency, BTC eased from an 18-month low as Altcoins rally and the crypto market stabilises after a tumultuous week. Despite the bearish market, the slight recovery is evidence of the continued optimism of the long-term value of digital assets, say a report by CoinDCX Research Team.

Reasons are galore which are responsible for the nosedive of the crypto currency.

Avinash Shekhar, CEO of ZebPay says: "Bitcoin's crash to less than a third of its ATH has been brought about by multiple factors including growing global inflation, anticipated Fed rate hikes in the US and the continuance of the Ukraine-Russia conflict."

The crash of Terra-Luna followed by the more recent troubles of crypto hedge fund, Three Arrows Capital, and Celcius, a hugely popular crypto-lending platform, have also negatively impacted market sentiment. Faced with uncertainty, investors are treading cautiously across financial markets, with high risk instrument bearing the brunt of the fallout, he said.

The immediate trigger for the crypto nosedive seems to be a massive sell-off by investors amid inflation fears and pausing of withdrawal by crypto lending service Celsius. To add to that, this is the first time since July 2021 that Bitcoin has traded below the $30,000 mark and is down by almost 56 per cent from its peak in November last year. Global financial markets are being battered by rising inflation, growing Russia-Ukraine tension, uncertainty in Sri Lanka. The rupee falling to a record low will also add to a significant impact on the financial markets and thereby putting tremendous pressure on the crypto market as they scramble to diversify and hedge their investments. Raj Kapoor, chief advisor, eCryptoverse, says: "I see more pain ahead for crypto markets, though this will eventually be a great buying opportunity for investors who hold a long-term view of the markets because the long-term fundamentals of Bitcoin are in place."

For, if you look at it, at an all-time high of 0.8 per cent, BTC USD equity co-relation is a positive co-relation and would soothe fears of crypto investors. No immediate rays of hope but the long term prospects are coming, he added.

Analysts feel that as the whole global market has tanked and a bearish trend is on, similar movement has been observed in the crypto industry. Bitcoin is dipping continuously and has reached at 200 weekly moving average, if this zone is sustained for a period of time we might see a short time but a good upward movement. Assuming any crash to a certain level or $12000 will be unwise as for now, because bitcoin has a good support level of $20000 which is also the all-time high of 2018 and $18000 is a good support zone or we can say a zone of accumulation.

Manoj Dalmia, founder and director, Proaasetz exchange says, "If a weekly close sustains this level then we can see a upward movement to $25000. Though a resistance of $29000 is important and a volume breakout can lead to $35000. The exact bottom cannot be predicted as the support zones are strong."

The cycle of Bitcoin movement is very interesting as from last 12 years it has always achieved a strong mark of ATH after creating a low. From almost $0 (the founding day) to $68000 the cycle of BItcoin has touched both low and high every year and interestingly the low is always the last cycles ATH, he said.

The year 2022 has not been a good year for the crypto assets as investors have seen sharp profit booking after a solid rise in 2021. Adding to investors' pain, rising inflation, monetary tightening from the central bank, looming fears of recessions have dented the sentiments most. Terra's LUNA Debacle and heavy institutional selling were the other key reasons for the crypto selloff.

Advising the investors, Kunal Jagdale, Founder and CEO, BitsAir Exchange says, "in such markets, it is more important to know what should not be avoided. So, stay away from junk tokens and avoid any leverage positions. Investors should hold their positions in quality tokens and average their costing for long term gains. It is a prudent approach as cryptos are here to stay."

Also, cryptos have outperformed with big margins after every bull market. So, smart investors should use their skills and wisdom to make the most of it, he added.

This market has taught all investors the importance of quality. So, stick with it. If possible, avoid making any new investments and clear the trash from your holdings. Stick to top names and pursue dollar cost averaging (DCA).

According to Jagdale, "avoid taking any leverage positions as their winter is long. Do not buy the tokens on buzz. Avoid FUD and FOMO from the market. Once the situations improve, the crypto market will back on track of the outperformance."

At this point of time, Shekhar says, caution is advisable. Those who invest in projects and protocols that have strong use cases have no need to panic as markets will ultimately rebound. Investing smart through adequate research, rupee cost-averaging and diversifying your portfolio will help you reduce risk and market the most of this market cycle.

Global financial markets are witnessing a universally coordinated downturn. While it's difficult to predict how long this will continue, we are bullish on Bitcoin and crypto in the long term. The pace of innovation in the category hasn't slowed and growing money market use cases combined with growing mass adoption globally clearly indicates the category's scope for future growth.