Bitcoin continues to decline amid risk aversion

Bitcoin price has seen a drop this week due to developments in the stock market and the results of the first meeting of the Federal Reserve Bank of 2022.

Bitcoin price has seen a drop this week due to developments in the stock market and the results of the first meeting of the Federal Reserve Bank of 2022.

The past seven days have been tough on me Cryptocurrency markets At the forefront of them is the Bitcoin currency, which began to decline since last Saturday, as it fell from the level of $ 39,000 to $ 36,000, but the downward trend has not ended yet. Later in the day, the Bitcoin fell below $ 35,000, but it consolidated during The following hours are around that level, and on Sunday the cryptocurrency tried to recover a bit but failed and reached just above $36,000 on Monday morning.

Things started to get violent as the price of the currency suddenly fell to trade at around $33,000 and even fell below that in Binance, this left hundreds of millions of liquidations in a single day, further entrenching the market's feeling of intense fear, however, the price bounced back On the same day and jumping from $33,000 to above $37,000 showing massive volatility, Bitcoin was apparently recovering very well until Wednesday's Federal Open Market Committee meeting.

But right after the meeting, Bitcoin and Wall Street tumbled, with Federal Reserve Chairman Jerome Powell blaming the supply and demand imbalance for the fact that the CPI rate was well above the Fed's target of 2%. The Fed will move from highly accommodative to significantly less accommodative and inappropriately in time.

What was driving the decline of Bitcoin?

Bitcoin

But this was not the only thing that caused turmoil in the markets, as the Russian Central Bank supported a blanket ban on cryptocurrencies in the industry, however, “Vladimir Putin” Russian President said that Bitcoin mining can provide Russia with competitive advantages and that they are in a really good position. Shortly thereafter, the country's Ministry of Finance proposed regulating the industry rather than banning it altogether.

Bitcoin has now lost about 50 % of its value since hitting an all-time high above $69,000 in November.

Fear of a rate hike: At this week's Federal Reserve meeting, the bank indicated a rate hike soon.

Sharp declines in other asset classes like stocks: The S&P 500 lost nearly 9% so far in January

Panic selling: high panic by new crypto investors who are not used to the high volatility characteristic of the asset class

Despite all the talk about Bitcoin as a store of value and a hedge against inflation, the recent behavior of the digital currency is quite the opposite.

With global stock markets affected in recent weeks by inflation fears and geopolitical tensions centered in Ukraine, bitcoin has found itself in a downward spiral as it moves more as a risky asset than any type of safe haven.

The digital token's correlation with Nasdaq and S&P 500 stock indices reached an 18-month high, while the correlation to gold, a traditional haven asset, was negative.

Mohamed Abdel Khaleq

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