The crypto market has been unusually quiet lately, but that doesn’t mean things are going well.
Over the last month, bitcoin and ethereum’s prices have remained low but steady. Bitcoin has mostly sat at the $19,000 price range while ethereum mostly kept to the low $1,300s. That finally changed last week, as bitcoin reclaimed $20,000 after a three-week hiatus and ethereum went beyond $1,500 for the first time since mid-September. Despite these upticks, both tokens are still about 70% below their all-time highs last November.
The relative stability of the notoriously volatile crypto market stands in contrast to a stock market that’s been all over the place in recent weeks. But the market could see some fresh volatility this week, as the Federal Reserve meets again to decide whether to further hike interest rates. Experts predict another 75 basis-point increase, which could send crypto tumbling. The crypto market has reacted negatively every time the Fed has hiked rates this year. If the past is any indicator, that’s likely to happen again this week.
Whatever happens with the price this week, some experts are still predicting prices will get worse in this bear market before they get better.
“Until proven otherwise, I think bitcoin and ethereum will retrace approximately 85%,” said crypto expert Wendy O, founder of CryptoWendyO media. “That places ethereum around $750 and bitcoin around $10,000. Obviously, those aren’t exact targets. I just think that we are going to get another drop down.”
Here’s what’s going on with the crypto market today and what it means for the future.
How Could This Week’s Fed Meeting Influence the Crypto Market?
It’s a quiet market right now, but that could change this week.
Stubborn inflation continues to drive the Federal Reserve to raise interest rates in an effort to rein in soaring prices. That’s going to come with significant “pain points” to the economy, according to Fed Chairman Jerome Powell. And a staggering economy is going to result in investors cutting back on their spending. This will likely impact bitcoin and ethereum, both of which have negatively reacted to Fed rate hikes over the last year.
Though previous rate hikes have temporarily driven the value of crypto down, prices have remained relatively steady. Experts think that’s likely due to long-term holders that remain resilient.
“There are certain people who want to hold crypto for the long term,” said Laura Shin, host of “Unchained” crypto podcast and author of the Cryptopians. “Over the last decade, there’s been a number of new people that have gotten into crypto and really believe in it, and so those are probably the ones who are helping to keep the price steady at these levels.”
So crypto prices could continue to hold steady despite all the economic uncertainty, but it’s not a guarantee. Macroeconomic factors continue to complicate the U.S. economy.
“The number one biggest driver of the deflation of the crypto markets over the last year is the macro environment,” Shin said. “Because there’s high inflation and because some people believe we might see a recession. There’s a lot of people who don’t want to have their money in speculative assets. Crypto would fit in that bucket.”
What will happen if more investors cut back and sell their crypto investments? Prices would likely tank, or, at a minimum, continue to remain low. But that’s in the near-term; we also asked experts where the market could be in two or three years. The short answer: it’s tough to say.
“It’s hard to speculate that far out,” Wendy O said. “And the reason why is we don’t know what type of regulation we’re getting. Speculating on what’s gonna happen that far in advance is doing a disservice to people because it might not hit what we’re predicting. Bitcoin might get across with ESG regulations or environmental regulations, like all kinds of other stuff.”
What Should Investors Do With Crypto Right Now?
In short: nothing. Crypto has always been a volatile and risky asset, and as the U.S. economy continues to reel, experts recommend you temper down on speculative assets. And whatever happens with the price, experts recommend that you let your investments sit while the economic situation gets resolved.
During this downtime, Shin recommends that people who are really invested in crypto take the time to learn more about the technology that powers it and to understand the ecosystem from which various coins stem from. Blockchain technology is still in its infancy, and many anticipate more uses are to come, including more developments on NFTs, web3 and DeFi.
Whatever the case, experts recommend that you dedicate no more than 3-5% of your investments towards crypto, and to only invest what you’re OK with losing.