This week in crypto: Regulatory pressures and price point shifts
Last year has been quite difficult from an economic standpoint, with inflationary pressure rising across the globe, leaving the general public struggling to make ends meet. Now, in 2023, the situation continues to be quite challenging, with authorities unsure of when the circumstances will return to normal. The growth slowdown is expected to be around 1.3 percent in 2023 compared to 2.7 in 2022, but most economists still believe that recession is more probable than not. It is yet unclear when it can be expected to strike, with some believing that it is possible during the April-June quarter, while others believe a July-September emergence is more likely.
The economic situation has also impacted the digital asset sector, with currencies and tokens currently dealing with uncertainty and price fluctuations. Although investors are still looking at how to buy Bitcoin to add to their portfolios, it is clear that most of them are still expecting to see volatility in the future and are looking to create strategies that can safeguard their capital.
Regulatory Pressures and price point shifts In Crypto
Regulatory crackdown
Over the past couple of months, the US crypto market has been at the center of a regulatory crackdown. Following the measures, several exchanges and banks with cryptocurrency-friendly policies had to cease operations. As a result, the price points that have started climbing since the beginning of the year started taking a downward path as of spring 2023.
Bitcoin fell by nearly 3%, while altcoins have been hit even harder. Regulators have continued their movements, however. As a result, some of the largest crypto marketplaces are expected to remove their US trading services and relocate to other areas. Since the more prominent platforms have a role in increasing overall price stability, investors can expect to see more significant price swings overall.
However, analysts have expressed the belief that there’s no cause for excessive concern, as the Bitcoin price is unlikely to drop under the $25,000 threshold. Indeed, most investors have remained unfazed by the downward moves, with many expecting them since the prices began climbing in January.
Push back
Exchanges haven’t remained quiet in the face of the regulatory onslaught, with many taking a stand against the situation. The world’s largest cryptocurrency exchange has recently addressed the controversy, discussing how the regulatory efforts have made it much more demanding to conduct business within US markets. Now, exchanges hope that the situation will be different in the UK, which is set to adopt a series of regulations over the next twelve months.
In the past, cryptocurrency markets have clashed with British authorities, with lawmakers claiming that exchanges cannot realistically be regulated and that their business activity is incompatible with the United Kingdom’s financial system. Just as in the case of the United States, regulators are concerned about alleged illicit activities, including financing of nefarious political and military purposes, as well as money laundering.
Some expect the regulatory frameworks to be more in line with offering increased protection to market participants and investors rather than as a means to censor cryptocurrencies. The European Parliament has recently voted to pass MiCA, the Markets in Crypto Act, legislation that would hold providers liable if customers’ crypto becomes lost while in their custody.
Memecoins
The cryptocurrency market is well-known for the craze created around different products, which causes large numbers of investors to flock to an asset class. One of the latest examples of this is the Pepe coin. Launched in mid-April, it hit a market capitalization of nearly $2 billion at the beginning of May. Despite having no utility, the staggering price surges of meme coins have made the news. Many traders have taken the opportunity to use these tokens as a sort of digital lottery, looking to achieve profits incredibly fast.
And while some likely achieved this goal, it’s not a majority of the investors, especially as the price noted a steep decrease only days after. However, the fun factor shouldn’t be neglected in this case. Just like internet memes serve a clear purpose as jokes and entertainment, so do meme coins. The community investing in them is motivated by the entertainment value of the products.
Other cryptocurrency investors believe that since there’s no intrinsic value to the meme coins, they cannot be compared to trading cryptocurrencies such as Bitcoin, as the principles of investing in an asset class don’t apply.
Selling pressure
There are two main concepts in cryptocurrency investing, the buying and the selling pressures. The two aim to quantify the disproportion between the two. Heightened selling pressure occurs when most traders are selling, which is typically an indicator that the price is set to decrease. The past week has not been particularly good for crypto, with the market value noting an overall decrease.
The selling pressure in the BTC market remains persistent, which could mean trouble for the coin, and precipitate its drop to $25,000. However, some investors believe that the current banking crisis might prove to be an unlikely help that serves to push Bitcoin higher. Although most cryptos are currently underperforming, it might be just a temporary slump that will be replaced by a more positive tendency soon enough.
Trend indicators
Over the past three weeks, the trend within the bitcoin market has been towards a bullish run. However, it has changed to a more neutral tendency recently. Since January, the trend has been toward upwards price movements. There have been some short-lived downward movements around the middle of March and the last week of April. In retrospect, these changes that seemed uneventful at the time might have foreshadowed the current trends.
Liquidity is also not performing very well either, and many investors find it challenging to conduct considerable transactions without influencing the prices quite drastically. Some believe this could signify a reversal to the previously bearish market, while other investors are confident that the movement won’t necessarily hold over a long period.
The cryptocurrency market continues to change and evolve. Not all trends will be positive, considering the asset will have better and not-so-good days in succession, much like other holdings classes. However, after cryptocurrencies proved that they could recover following the shallow values around the end of 2022, investors are confident that any less-than-favorable trends are only temporary.
