Bitcoin is Increasingly Becoming Data Dependent! Rough Path Ahead

Bitcoin is in huge trouble! More volatility awaits investors who have been expecting profits

Based on reports, Bitcoin is holding steady at US$20k at the time of writing this article, but the real question that bugs investors is, for how long? A few days ago, the Bitcoin price fell below US$20,000 and plummeted down to US$18,000, soon recovering back to US$19k. Bitcoin has been plummeting due to various reasons, but currently, the Fed is mostly responsible for its declination. Bitcoin's recent declination below the critical US$20k range occurred after the Federal Reserve affirmed that it would continue to tighten policy to bring down the effect of inflation. Experts commented that risky assets are struggling due to growing regulatory crackdowns, and tightening monetary policies. The inflation ought to trigger an economic slowdown, which is one of the main reasons why the BTC token has been trading in a relatively tight range of US$18k to US$23k over the past couple of months. Now, key indicators and analysts predict that relief is not even close! The BTC price might plummet further below.

Investors have been quite stressed and worried about the future of the crypto market. The cryptocurrency lender, Celsius' acts to freeze withdrawals and transfers due to extreme market conditions triggered panic and fear among investors in the market. Bitcoin's current behavior demonstrates that the crypto will not reach a stabilized position in the upcoming months. This week's pullback in the BTC trading price has triggered the crypto to fall below its 200-week moving average (200WMA), a metric that has been under consistent threat due to the plummeting crypto price. Experts claim that for the first time in the past two months, BTC has consistently traded below its 200WMA. Currently, it seems like BTC's data dependency will be the end of crypto in 2022.

The Federal Reserve Might Lead Bitcoin Traders to Become Data Dependent

Executives from the Fed have denoted that more volatility awaits Bitcoin in the upcoming months ahead, as the flagship cryptocurrency is facing decoupling from traditional markets and decreasing forward guidance from the US Federal Reserve. The BTC token has already fallen below by over 60%. Its increasing volatility reflects the Fed's new data-driven approach that aims to transform its current practice for foreshadowing the pace of interest rate hikes. Besides these factors, more investors are leaving the crypto market as macroeconomic uncertainty weighs heavily on crypto investors.

The Fed is prioritizing inflation first, and now the firm is willing to jeopardize stocks and other riskier assets including cryptocurrencies. The Fed's new level of opacity would lead Bitcoin traders to react to how the Fed operates, and it also includes studying the same indicators as Fed bankers. Analysts predict that a recovery rally is far off and that investors should be patient until BTC regains back its lost track.

Bottom Line

Several investors consider Bitcoin's volatility as a part of the game, but these price swings might get difficult for several others. Crypto price fluctuation was followed by surging inflation, and ongoing uncertainty over regulatory actions by the US government Biden's executive order is also one of the major triggers that moved the BTC price. Meanwhile, some of the drops have been also caused due to a combination of factors. If you are someone who is contemplating investing in Bitcoin or any other cryptocurrency for that matter, you have to be extremely careful and consider the amount that you are ready to lose before trading digital assets.