Since the end of 2021, it has been seen how the economic and government measures of powers such as the United States and Europe have drastically affected the performance of Bitcoin and other cryptocurrencies so far in 2022. For more information regarding this type of digital asset, visit Chain Reaction trading.
Every time the Federal Reserve of the United States makes a pitiful statement, Bitcoin has been drastically losing its support level on several occasions, causing anxiety and fear of investing among investors.
Bitcoin – Susceptible to the Fed
We are facing a relatively vulnerable global financial and economic market in which many factors fluctuate that seem to be conspiring against the evolution of the digital financial field, but this is not the case.
2021 could be considered the year where Bitcoin achieved the highest valuation not only in price but also in market capitalization, where fluctuations in supply and demand left many investors with the need to invest in Bitcoin, only they did not expect such an explosive scenario for 2022.
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It has not only been the measures of the Fed regarding the increase in interest rates but also the war between Ukraine and Russia, as well as the excessive need for control and regulation over cryptocurrencies in general; it has been a conglomerate of actions that have turned the uptrend into a tailspin.
When talking about the vulnerability in terms of the impact that the Fed has had on Bitcoin, it refers specifically to the availability of currency that individuals and large companies can have to invest in risky assets such as digital currencies.
If the economic and financial measures tend to be stricter, then people do not have free capital to dispose of their savings or reserve funds to invest in Bitcoin. While if the measures are mild and less restrictive, the principal investment is in some refuge asset, and after the positioning acquired by crypto assets after the pandemic, this option is not indifferent.
From the Fed’s perspective, the outlook for Bitcoin and cryptocurrencies may not be ideal since the primary mission is to reduce inflation through an economic contraction. The biggest fear of cryptocurrency investors is that this trend will last until 2023, keeping the digital financial market at a reasonably low level.
Massive Bitcoin sales after new Fed measures
The fall of Bitcoin during this year has been drastic; it has managed to reach 70% compared to its last historical maximum of 2021; it is interesting to note that after the statements of Powell, President of the United States Federal Reserve, the prices of this digital assets tend to collapse.
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Bitcoin has reached $19,000 per unit, which undoubtedly causes the market to enter a dire state of FOMO since it has been seen how many companies in the crypto sector have been collapsing little by little.
The considerable increase in the supply of Bitcoin is due to the rise in feelings of fear on the part of investors who, after economic measures, usually infer that the valuation of crypto assets may continue to decline.
Since the end of July, a change was beginning to be observed that seemed to indicate the endpoint of the crypto winter; everything seems to be completely different, although it should also be noted that the phases of Bitcoin are cyclical, and the time lapses in that could generate a change in trend.
Fed could take the step to change the trend
Cryptocurrencies and the digital financial market, in general, are susceptible to the opinions generated in the environment, including social networks that cause concern among investors and could in some way destabilize or create a matrix of erroneous information.
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If a much more flexible economic policy is generated that allows the economy of both the United States and Europe to return to the point of balance where economic conditions are correct to inject financial assets into the investment sector, it would be the first step toward a relevant improvement in the digital market.
Conclusion
Digital assets seemed unchanged by the conditions and external factors of the traditional economy, although apparently, this year was the opposite; the effects on the digital financial system were drastic, making the market much more volatile and speculative.