Market Looks Poised to Decline Again Despite Calls for Bottom | RTWM 1.23

By Zacharias | RekTimes Archive | 31 Jan 2022


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30 January 2022: Over the weekend, many cryptocurrencies - including both Bitcoin & Ethereum - have reversed and seen moderate rises in price of around 8% each. This reversal has prompted many to point to recent market progress as evidence of the return of the bull market and even brought back considerably optimistic 2022 price targets. Are you worried you might have missed the bottom of the latest correction? Keep reading.

In a rush? Here are this week's key takeaways:

  • Stablecoins struggle over past week with coins like UST losing their dollar peg

  • Market declines slightly over past week (~2%)

  • Calls for regulation grow within US Government


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Top Headlines

Stablecoins were a big subject over the past week as multiple different coins lost their dollar peg. This trend was led by Terra's UST stablecoin which caused Terra (LUNA) to lose 36% in value over the past seven days. Despite all of this, the market did recover partially with many coins gaining a nice bounce after last week's major sell off.

Of course the FED made for a volatile week with talks of faster-approaching rate hikes amid historical inflationary pressures. In the US, regulation and crypto-related bills are all the talk in government as the Biden Administration looks for immediate regulation and Arizona moves to make crypto legal tender for the state.

Further Reading - In the Know

  • Terra's UST Stablecoin loses its dollar peg for second time since May 2021 (CoinDesk)

  • Facebook's cryptocurrency project reportedly ending (Business Standard)

  • OpenSea issues refunds after "inactive listings" NFT blunder (Decrypt

  • Celsius & Gemini cryptocurrency exchanges under SEC scrutiny (Bloomberg)

  • Arizona looks to make Bitcoin, crypto legal tender (NASDAQ)

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Crypto-Economy & Markets

The cryptocurrency market is actually down this week slightly with a 2% loss. This loss is coming despite decent gains by Bitcoin and Ethereum, though the reversal has been short-lived. The Fear & Greed index has gained 7 points back from last weeks extremely low 13 to this week's 20.

Many coins, including the total cryptocurrency market, are sitting below their 200 day moving averages and look poised to continue into a long term decline despite the market being extremely fearful. At this point, the market has been largely in decline for 3 months.

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Fear & Greed Index


Total Market

The total cryptocurrency market fell another 2% in the past week. The total market cap remains over 20% below its 200 DMA and has also seen the 50 DMA move below it. The market stands at $1.64 trillion USD.

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Bitcoin

Bitcoin climbed to just over break even for the week (~2% gain at the time of this writing) after losing considerable value last week.

Although there have been some pops, Bitcoin officially remains at or below $37,000 USD.

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Alt Coins

The altcoin market (total crypto market cap minus Bitcoin) has declined lower over the past week as well and sits 24% below its 200 DMA.

Ethereum is about break even from last week at a price point of ~$2,500 USD.

The total market cap, minus Bitcoin, is shown below:

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Total Crypto Market Analysis

At this point in the market, although yes sentiment has been low for weeks, there is simply no reason outside of a MAJOR catalyst that should seen hundreds of billions return to get even close to the bullish sentiment that remains.

Nearly every major coins is not only down heavily from the long term trend indicator that is the 200 DMA, but also remain in an obvious decline despite occassional rallies in price. There is also no indication that a bottom is in. Many coins have not even fallen far enough to be below 2021 prices. 

Cryptocurrencies are still considered heavy "risk on" assets and it has been made abundantly clear that major institutions and investors are beginning to move away from this into safer assets. Declines in the stock market has largely been fueled by growth stocks like tech being sold in favor of value stocks. Talks of tapering and a rise in interest rates makes for far less risk tolerance in the market.

For the market to reverse and rebound, major institutions - not retail - have to go in big and seriously bet on cryptocurrencies. At this point in the year with the economy outlook the way it is, this seems unrealistic. Much of the retail-fueled rally that occurred before May has never returned - and neither has the stimulus money that pumped it.

The most likely probability at this points APPEARS to be a market grind that sees prices decline overall well into the spring - if not later. Buying within a set dollar cost average or long term accumulation plan is recommended to counter losses and increase holdings. This should be done strategically.


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Summary

At the moment we appear to be well into a bear market. 12 weeks in and there appears to be no true momentum capable of mounting a new rally to justify still calling this a bull run. With all the talk building against stablecoins too, there is a medium term risk to reward here that I don't believe is justified.

This is obviously in no way a guarantee but RekTimes is expecting the market to decline again next month into March. For now, continue to dollar cost average your holdings down if you had bought anytime during 2021. Long term accumulation into sound projects should always be the goal - a bear market just makes it easier because you can buy more instead of less each week.

Coming up next week from RekTimes includes:

  • Article on stablecoins & potential regulation
  • Article TBA 
  • RekTimes Weekly Markets 1.24

Best of luck over the next week!


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Zacharias
Zacharias

I like DeFi, philosophy, and economics | Founder of RekTimes


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