What Is the Current State of the Crypto Market?

The market value of cryptocurrencies has dropped by about $500 billion since the beginning of the year, from $2.2 trillion to $1.68 trillion. Furthermore, the anticipation of imminent interest rate hikes frightened investors across both crypto and equity markets, resulting in double-digit percentage losses across nearly all categories of tokens.

Bitcoin and Ether, two of the most popular cryptocurrencies, have lost 22 percent and 32 percent, respectively, in the last month. They are currently hovering at $37,030 and $2,541.

With these two market leaders taking such a heavy hit, the rest of the crypto market has naturally also been affected. Many other altcoins have also suffered as a result.

According to cryptocurrency market data supplier CryptoCompare, assets under administration for digital asset investment vehicles, which include swap and over the counter (OTC)-traded products such as the Grayscale Bitcoin Trust and Purpose Bitcoin ETF, have dropped from $58.6 billion in December to $43.9 billion (as of January 27), a further decline from the peak of $74.7 billion in October.

Cause for Concern?

Although this may seem like a scary ordeal, investors should not be too concerned about the drop in the price of these cryptocurrencies. Even though drops of this magnitude would be quite terrifying in a regular equity market, cryptocurrencies are notoriously volatile, and as a result changes in price of this magnitude are to be expected.

Furthermore, for the second week in a row, investors poured money into cryptocurrency portfolios as the Bitcoin market steadied after one of the worst starts to a year historically.

According to a study released Monday by a digital asset manager, crypto wallets saw $19 million in inflows in the seven days leading up to January 28th.

While the increase appears minor in comparison to all of the $200 million-plus weeks of deposits in 2021, the pattern indicates that investors are cautiously increasing to positions “at these reduced price levels,” according to analysts.

During the previous week, investors deposited $14 million into crypto accounts, reversing five weeks of $532 million in withdrawals.

Bitcoin (BTC) is down 17% this year so far, trading at roughly $38,500 at the time of writing. The pricing is still significantly lower than the all-time high of $69,000 set in November 2021.

Last week, $22.1 million flowed into Bitcoin-focused investments, while $26.8 million flowed out of Ethereum-focused investments.

The native cryptocurrency of the Ethereum network, Ether (ETH), is down 27% this year to around $2,700.

Market experts commented that Ethereum continues to face challenges from bad sentiment.

Multi-asset funds, which invest in a variety of coins, raised $32 million, the largest since June 2021. According to data, this indicates that investors are embracing a diversified investment approach.

However, last week, portfolios focusing on Solana, Polkadot, and Cardano all had outflows, suggesting investors are abandoning altcoins, according to data.

Is Bitcoin Expected to Rebound?

Bitcoin has lost almost 45 percent of its total value from its historical high in November, but that hasn’t deterred some retail investors, who believe the price may rebound and are “buying the dip,” according to a new study.

According to a research report delivered last Tuesday, over 21% of U.S. adults surveyed by data intelligence agency, Morning Consult, were looking at purchasing Bitcoin (BTCUSD) as of January 24, when the cryptocurrency dropped as low as $32,983. The rate has been steady since the start of November, after Bitcoin hit an all-time high of $68,991, according to the research.

As a result, consumers appear to be less concerned about Bitcoin’s price drop this time around than they were last summer, Charlotte Principato, managing director at Morning Consult, stated in the report.

During Bitcoin’s most recent selloff, the percentage of adults in the United States considering buying the cryptocurrency fell to 13 percent in July from 17 percent in May, according to the survey.

According to the research, despite the current drop, Bitcoin owners predict the cryptocurrency’s price to grow to roughly $55,223 in six months. People who own upwards of $500 in Bitcoin seem to be the most positive, seeing a six-month rise to $62,439 for the cryptocurrency.

The Bottom Line

Bitcoin investors, on average, are more risk-tolerant than the overall population and are four times more ready to accept financial hazards. Although crypto investments have these massive dips, they have proven to be able to bounce back before, and investors are confident of this cycle repeating.

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Author: Jason Donaldson