Weekly Crypto Analysis: Crypto Market Tumbles, Here’s Everything You Should Know

2022/06/20 12:58:23

Cryptocurrencies trade 24/7, often fluctuating dramatically on weekends when financial markets are closed. Bitcoin and other cryptocurrencies fell sharply on Sunday, BTC losing approximately 55% of its value year to date and is down roughly 70% from its all-time high near $69,000 in November.

Meanwhile, Ether (ETH) is down 69% in 2022.

There is no single cause for such a massive drop, as a series of events are conspiring against cryptocurrencies, instilling fear in the market. The recent crypto selloff began in May with the failure of the Terra blockchain and has coincided with the Federal Reserve raising interest rates amid recession fears, Wall Street entering a bear market, and soaring inflation.

Several crypto bulls have characterized the recent drop in the crypto market as a prime buying opportunity, while critics warn that the fundamentals have not changed and that the price could fall even further.

The good thing about cryptocurrency trading is that you can profit even when the market is crashing through short selling. So if you're new to cryptocurrency, check out KuCoin's comprehensive guide to short-selling cryptocurrencies.

Let's go deeper and take a look at the most recent crypto market news and Bitcoin's technical outlook.

Crypto Market Overview

With the drop in Bitcoin's price, its dominance has also suffered significantly, falling from 47.23% last week to 43.37% today. As a result, the supply of Bitcoin on various exchanges has decreased dramatically.

On Monday, the leading cryptocurrency pair, BTC/USD, is trading at $19,836.92, while Ethereum, the second-largest cryptocurrency by market capitalization, has plunged sharply to $1,067.22, down 21.61% in the last seven days.

Bitcoin SV (BSV), Helium (HNT), and Synthetix (SNX) remained the top performers from the previous week. BSV soared by more than 38.31% to trade at $64.46, while HNT is up by 31.49% in the last seven days, holding at $10.71 right now.

Finally, the SNX has made an outstanding recovery, rising 65.21% in 24 hours and 26.93% in seven days to trade at $2.55.

Cryptocurrency Market Heatmap | Source: Coin360

Last week's worst performers were Monero (XMR), KuCoin Token (KCS), and Nexo (NEXO). XMR is down more than 27% to $109.11, and KCS fell more than 25% to $10.11, but the KuCoin token has recovered 8.64% in the last 24 hours. Lastly, the NEXO coin is down 23.73% in the last seven days.

The cryptocurrency market remains risk-off due to a series of events we will explore below.

Top Altcoin Gainers and Losers

Top Altcoin Gainers:

Bitcoin SV (BSV) ➠ 38.31%

Helium (HNT) ➠ 31.49%

Synthetix (SNX) ➠26.93%

Top Altcoin Losers:

Monero (XMR) ➠ 27.71%

KuCoin Token (KCS) ➠ 25.16%

Nexo (NEXO) ➠ 23.73%

News Highlights

Here are some of the events that made the previous week's crypto news section stand out:

Bitcoin Tumbled Below $20K, as US FED Hikes Interest Rate By 75 bps

One of the reasons behind a recent dip in Bitcoin prices and the overall cryptocurrency market could be associated with the interest rate hike from the US central bank Federal Reserve.

After inflation unexpectedly accelerated last month to 41-year highs, the Federal Reserve increased the Fed Funds rate by 75 basis points (bps) to 1.5%-1.75% during its June 2022 meeting, rather than the 50 basis points initially expected.

It is the largest rate increase since 1994, and Chair Powell hinted that a similar move could occur at the next meeting, but he does not anticipate 75bps moves becoming common. Interest rates are expected to rise to 3.4% this year, a significant increase from the 1.9% predicted in March.

Economic Growth: The US economy is expected to grow by 1.7% this year, down from the 2.8% predicted in March, and the growth forecast has been lowered for both 2023 (1.7% vs. 2.2%) and 2024 (1.7% vs. 2.2%).

US Inflation: PCE inflation is expected to be 5.2% in 2022 (up from 4.3% in March), while the outlook for 2023 (2.6% vs 2.7%) and 2024 has been revised lower (2.2% vs 2.3%). So, to control the massive rise in inflation, the US FED has to take corrective measures, which usually start by reducing the economy's money supply.

Unemployment Rate: The unemployment rate is expected to rise over the next three years, reaching 3.7% in 2022 (up from 3.5%), 3.9% in 2023 (up from 3.5%), and 4.1% in 2024.

What Does the US Federal Reserve's Rate Hike Mean for Crypto?

As you probably know, there's a positive correlation between US stocks and cryptocurrencies. This means a surge in stock prices typically drives an uptrend in crypto coins. The rise in US interest rates has a negative impact on US stock markets because it increases the cost of debt financing, lowering companies' profit ratios. This could slow company growth and overall performance, so investors try to adjust their portfolios by selling stocks and investing in less risky assets like US bonds and gold.

When interest rates rise, the opportunity cost of investing in US bonds falls compared to investing in stocks and cryptocurrencies. So investors go to earn a risk-free return on investments with US bonds. Similarly, investments typically flow out of digital currencies as a rate hike drives an uptrend in fiat currency prices and investors prefer to hold US dollars.

Well, this is one of the reasons behind the bearish sentiment in the market. More reasons are down the line.

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Risk-off Sentiment In-Play as Celsius Says It Will “Take Time” to Stabilize Its Liquidity

Recalling KuCoin’s previous Weekly Crypto Analysis report, Celsius, one of the largest crypto lending platforms, announced last Sunday that it was pausing withdrawals, swaps, and transfers "due to extreme market conditions." The announcement came after one of the most brutal weekends in cryptocurrency history when hundreds of millions of dollars were lost.

A week after stopping withdrawals, the cryptocurrency lending platform Celsius Networks Ltd. said on Sunday that it would "take time" to get its liquidity and operations back on track. A recent update to the Celsius Network crypto platform said, "We want our community to know that our goal is still to stabilize our liquidity and operations."This procedure will take some time.

The company also announced that it is suspending its Twitter Spaces and Reddit AMAs to "focus on navigating these unprecedented challenges and seeking to fulfill our responsibilities to our community." Celsius eventually canceled an AMA (Ask Me Anything) session with its CEO on Friday, just minutes before it was scheduled to begin.

The recent drop in cryptocurrency prices, particularly Ether, could be attributed to the latest developments from the Celsius network.

Babel Finance Pauses Withdrawals Amid “Unusual Liquidity Pressures”

Following the footsteps of Celsius Exchange, the Hong Kong-based Babel Finance temporarily halted crypto-asset withdrawals and redemptions as the crypto lender scrambled to pay its clients following the recent downturn in the digital currency market.

In a time when interest rates are going up, investors are getting rid of risky assets like cryptocurrencies. For example, bitcoin lost more than half of its value this year after hitting a record high of $69,000 in November.

Crypto lenders accept retail crypto deposits and reinvest them, boasting double-digit returns and trying to attract tens of billions of dollars in investments. However, due to the recent financial crisis, lenders cannot recoup their clients' assets.

Babel, which only accepts Bitcoin, Ether, and Stablecoins, raised $80 million in a funding round last month, valuing the company at $2 billion. It had $3 billion in outstanding loans on its balance sheet at the end of last year. This could also be one of the major reasons for another round of crypto market meltdowns.

Salvadoran President Has Some Advice for You, Can Nayib Bukele Underpin the Bitcoin Price?

Early this weekend, Bitcoin fell to a level not seen since 2020, trading at $19,900, up 10.09% in the last 24 hours and 22.04% over the previous seven days.

El Salvador has bought 2,301 bitcoins since making BTC legal tender alongside the US dollar in September of last year. With the price of bitcoin plummeting, El Salvador's BTC investment is said to have lost half its value, or more than $50 million.

Nayib Bukele Tweet - Source: Twitter

El Salvador's president, Nayib Bukele, has spoken about bitcoin investments amid the steep decline of cryptocurrency.

"I see that some people are worried or anxious about the #Bitcoin market price. My advice: stop looking at the graph and enjoy life. If you invested in #BTC your investment is safe and its value will immensely grow after the bear market. Patience is the key. “

Investors will be curious to see if Nayib Bukele's advice can prevent people from selling cryptocurrency and gaining long positions.

Crypto Calendar: Events to Watch This Week

20/06/2022 - NFT.NYC (AAVE)

21/06/2022 - Live AMA (NEXO)

22/06/2022 - Office Hours (XTZ)

23/06/2022 - Crypto Expo Milan (BIFI)

24/06/2022 - Vibrant NFT Exhibition (ICP)

Will the Vasil Hard Fork Spark a Cardano (ADA) rally?

Cardano has been anticipating its most recent hard fork, the Vasil Hard Fork, which is said to improve network efficiency and make the network more developer-friendly. The Vasil Hard Fork is scheduled for June 29, 2022, and the countdown to the hard fork has given many people hope. Given how badly the price of Cardano's native cryptocurrency, ADA, has been struggling, the hope is that the hard fork will help it recover.

Importance of Vasil's Hard Fork

Cardano is also seeking to make the network more developer-friendly, with over 1,000 projects being developed on the network. More projects are expected to join because it performs better than Ethereum, and the network is built to facilitate all of these easily.

The rollout of the Vasil hard fork on the mainnet is still a week away, but there are already many discussions and hopes surrounding it. It is running on the Cardano testnet, working to improve smart contract efficiency. Smart contracts on the Cardano network will be cheaper and faster after the June 29th launch.

Vasil comes after the Alonzo hard fork, the most significant hard fork on the Cardano network. Alonzo had introduced smart contracts to the network. On the other hand, Vasil will build on and improve on this foundation to create a more efficient network.

This update drives optimization around Cardano and has the potential to drive an uptrend in ADA/USDT.

Fear and Greed Index Signals “Extreme Fear” - Bearish Bias Dominates

The cryptocurrency market remained under pressure on Monday, as the Fear and Greed Index's "extreme fear" signal kept market sentiment risk-off.

The cryptocurrency market is highly volatile, and people become greedy when the market rises, resulting in FOMO (Fear of missing out). Furthermore, in an irrational reaction to red figures, people frequently sell their coins.

Fear & Greed Index | Source: Alternative

When the Fear and Greed Index shows extreme fear, the markets are usually in the "oversold" zone. This is when crypto bulls sit tight, waiting for the cryptocurrency market to turn bullish. Better be ready for it.

Bitcoin (BTC/USDT) Analysis on KuCoin Chart

The leading cryptocurrency plunged dramatically to trade under the $20,000 psychological mark. However, the BTC/USDT coin has entered the oversold zone and may gain support near the $17,700 level.

As you can see on the KuCoin chart, the RSI fell under 20 before recovering to 35. Although it’s still under 50, in the sell zone, the candlesticks are suggesting chances of a bullish correction in the market.

BTC/USDT Chart on the Daily Timeframe | Source: KuCoin

On the daily timeframe, the BTC/USDT coin has formed a candlestick pattern called "Tweezers Bottom," which is known to drive a bullish reversal in the market; thus, BTCUSD has the potential to experience a bullish correction.

The BTC/USDT has already completed the 23.5% Fibonacci retracement, and this level is acting as a significant resistance at $21,000. A surge in BTC demand and a breakthrough in this resistance exposes the BTC/USD to the following resistance levels of 23,023 (38.2% Fib) or $24,650 (50% Fib).

Let's keep an eye on the $21,000 level as failure to breakout at this level could expose BTC price towards the support areas of $17,700 or $16,300.

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