Will the tragic start of the crypto market in 2022 turn around?

In early 2021, the cryptocurrency market was on a tear, driven by institutional adoption and easing macroeconomic trends. However, a year later, in a different macro environment, January 2022 has already started to move in the opposite direction for most cryptoassets.

Many analysts like to compare recent volatility to previous cycles in the history of cryptoassets. However, the macro environment has changed significantly over the past year, with crypto asset price movements increasingly being influenced by other assets, such as the stock market.

Will the tragic start of the crypto market in 2022 turn around?

Stocks fell along with crypto assets as global markets adjusted to a more aggressive stance from the Federal Reserve. The Nasdaq Composite is around 13,352, down nearly 14.65% so far in 2022. Typically, higher interest rates tend to dampen demand for riskier assets (high-growth tech stocks).

Will the tragic start of the crypto market in 2022 turn around?

The returns of the S&P 500 and Bitcoin over the past six months are highly positively correlated, with a correlation coefficient close to an all-time high of 0.35. Changes in the macro environment have negatively impacted almost all mainstream markets, with assets seen as high-risk, such as tech stocks and cryptocurrencies, being hit harder. This is not the same as 2018, when the crypto market did not fall in tandem with tech stocks or other stocks.

Markets tend not to react to rate hikes themselves, but to expectations of future policy processes. Markets are pricing in the new information as the Fed changes its rhetoric and announces plans for a faster-than-expected rate hike.

Will the tragic start of the crypto market in 2022 turn around?

U.S. Treasury bond rates are higher, reflecting the Fed’s intent to raise rates and fight inflation. One of the best ways to observe changes in interest rates is to look at the yield curve. The yield curve shows the available interest rates on bonds of different maturities. The chart above shows the U.S. Treasury yield curve for two different dates: January 4, 2021 and January 21, 2022. Interest rates, especially in the short term, have risen compared to last year as markets reacted to the Federal Reserve’s announcement that rate hikes will begin in March.

Will the tragic start of the crypto market in 2022 turn around?

Despite the grim macro picture, some of Bitcoin’s on-chain metrics are hitting all-time market cycle lows. Say, MVRV, which is the ratio of market value (free-float market capitalization) to realized value (capitalized). MVRVs above 3 usually mark local highs, while values ​​below 1 tend to signal market cycle lows. Currently, Bitcoin’s MVRV is already at a relatively low level (1.16). Of course, past metrics are no 100% guarantee of their future reliability. And, in extreme cases, the MVRV has repeatedly dropped below 1.0, such as in March 2020.

Another potentially positive sign is that most of Bitcoin’s supply has remained untouched in recent months, suggesting that long-term holders still maintain strong confidence in the price.

Will the tragic start of the crypto market in 2022 turn around?

Also known as the “HODL Wave Chart”, the Bitcoin age distribution band categorizes Bitcoin by the time of its most recent on-chain transfer. In the past year, about 60% of the bitcoin supply has been dormant, and long-term holders have not seen a large number of shipments. In addition to indicators, there are other signs on-chain that cryptocurrency adoption is continuing, a trend that isn’t hampered by short-term price swings.

Will the tragic start of the crypto market in 2022 turn around?

The number of addresses holding relatively small amounts of Bitcoin and Ethereum continues to increase. As NFT-related activity continues to surge on the network, the number of addresses holding 0.01 to 1 ETH recently surpassed 20 million, which is more than double the 9.8 million figures on January 1, 2021. Likewise, addresses holding 0.001 to 0.1 BTC have continued to increase.

Finally, it’s worth noting that tech builders are pouring into the crypto ecosystem, with GitHub data showing that thousands of tech builders have joined in crypto research and development efforts in recent months. As projects continue to make progress in areas such as L2 solutions, regardless of short-term price trends, the crypto industry is still an incremental market in the long run, and this year is still expected to be an important year for crypto adoption and growth.

In early 2021, the cryptocurrency market was on a tear, driven by institutional adoption and easing macroeconomic trends. However, a year later, in a different macro environment, January 2022 has already started to move in the opposite direction for most cryptoassets.

Many analysts like to compare recent volatility to previous cycles in the history of cryptoassets. However, the macro environment has changed significantly over the past year, with crypto asset price movements increasingly being influenced by other assets, such as the stock market.

Will the tragic start of the crypto market in 2022 turn around?

Stocks fell along with crypto assets as global markets adjusted to a more aggressive stance from the Federal Reserve. The Nasdaq Composite is around 13,352, down nearly 14.65% so far in 2022. Typically, higher interest rates tend to dampen demand for riskier assets (high-growth tech stocks).

Will the tragic start of the crypto market in 2022 turn around?

The returns of the S&P 500 and Bitcoin over the past six months are highly positively correlated, with a correlation coefficient close to an all-time high of 0.35. Changes in the macro environment have negatively impacted almost all mainstream markets, with assets seen as high-risk, such as tech stocks and cryptocurrencies, being hit harder. This is not the same as 2018, when the crypto market did not fall in tandem with tech stocks or other stocks.

Markets tend not to react to rate hikes themselves, but to expectations of future policy processes. Markets are pricing in the new information as the Fed changes its rhetoric and announces plans for a faster-than-expected rate hike.

Will the tragic start of the crypto market in 2022 turn around?

U.S. Treasury bond rates are higher, reflecting the Fed’s intent to raise rates and fight inflation. One of the best ways to observe changes in interest rates is to look at the yield curve. The yield curve shows the available interest rates on bonds of different maturities. The chart above shows the U.S. Treasury yield curve for two different dates: January 4, 2021 and January 21, 2022. Interest rates, especially in the short term, have risen compared to last year as markets reacted to the Federal Reserve’s announcement that rate hikes will begin in March.

Will the tragic start of the crypto market in 2022 turn around?

Despite the grim macro picture, some of Bitcoin’s on-chain metrics are hitting all-time market cycle lows. Say, MVRV, which is the ratio of market value (free-float market capitalization) to realized value (capitalized). MVRVs above 3 usually mark local highs, while values ​​below 1 tend to signal market cycle lows. Currently, Bitcoin’s MVRV is already at a relatively low level (1.16). Of course, past metrics are no 100% guarantee of their future reliability. And, in extreme cases, the MVRV has repeatedly dropped below 1.0, such as in March 2020.

Another potentially positive sign is that most of Bitcoin’s supply has remained untouched in recent months, suggesting that long-term holders still maintain strong confidence in the price.

Will the tragic start of the crypto market in 2022 turn around?

Also known as the “HODL Wave Chart”, the Bitcoin age distribution band categorizes Bitcoin by the time of its most recent on-chain transfer. In the past year, about 60% of the bitcoin supply has been dormant, and long-term holders have not seen a large number of shipments. In addition to indicators, there are other signs on-chain that cryptocurrency adoption is continuing, a trend that isn’t hampered by short-term price swings.

Will the tragic start of the crypto market in 2022 turn around?

The number of addresses holding relatively small amounts of Bitcoin and Ethereum continues to increase. As NFT-related activity continues to surge on the network, the number of addresses holding 0.01 to 1 ETH recently surpassed 20 million, which is more than double the 9.8 million figures on January 1, 2021. Likewise, addresses holding 0.001 to 0.1 BTC have continued to increase.

Finally, it’s worth noting that tech builders are pouring into the crypto ecosystem, with GitHub data showing that thousands of tech builders have joined in crypto research and development efforts in recent months. As projects continue to make progress in areas such as L2 solutions, regardless of short-term price trends, the crypto industry is still an incremental market in the long run, and this year is still expected to be an important year for crypto adoption and growth.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/will-the-tragic-start-of-the-crypto-market-in-2022-turn-around/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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