“Cryptocurrencies thrive in an environment of zero interest rates and the supply of new cheap money. In such an environment, investors do not find a return on safe assets, such as bonds, they turn to higher-risk assets, from stocks to cryptocurrencies, ”says Pavel Ryska, an analyst at J&T Banka.
Some investors are already betting that the “shine” of the coins will partially disappear. “Therefore, on a relative basis, the attractiveness of cryptoactive assets is likely to decline, which may lead to a further significant outflow of capital with further price declines,” adds Consequ analyst Michal Stupavský.
What will the investment year 2022 look like?
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The January drop in the value of cryptocurrencies, which can be caused by the fall of the still dominant bitcoin and alternative coins in approximately the same proportion, is the number one in a row since the top of the market in November, although it is one of the strongest. In total, investors have lost a trillion dollars in coins over the past two months, and the market is currently the weakest since the end of last summer.
At the same time, the market downturn coincides with a period in which the Fed sends increasingly strict signals in the face of rising inflation. It was during the first days of January that the minutes of the Fed’s December meeting became known, according to which bankers can start tightening currency screws as early as March.
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“Apart from prices, trading volumes have also fallen significantly in recent months. The Fed’s policy is certainly an important reason why investors are moving away from the most risky bets where cryptocurrencies belong, “says Patria Finance analyst Tomáš Vlk.
According to statistics from the Coinmarketcap portal, for example, during the spring wave of interest in cryptocurrencies, cryptocurrencies were traded daily, even in the amount of over three hundred billion dollars. During the autumn November wave, the daily volume of trades did not exceed half. During January, the daily activity of cryptoinvestors fell below an average of one hundred billion dollars.
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According to economists, the Fed’s policy will trigger considerations among investors that may be qualitatively different from simple speculation over the past two years. “The added value of cryptocurrencies is low and for long-term investors, investing in stocks or real estate is far better. Companies are able to generate profit for shareholders, even if the Fed tightens its belts. There is no such ability with cryptocurrencies, “emphasizes Finlord analyst Boris Tomčiak.
The value of the cryptocurrency market is less than $ 1.9 trillion. The market reached its historic peak at the beginning of last November, when the market capitalization of all coins attacked the value of three trillion.
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