The price of bitcoin has had a tough 2022 performance as concerns about higher interest rates converge with heightened geopolitical, inflationary and drought risks. After hitting an all-time high of around $70,000 in 2021, bitcoin fell to a low of $17,470 this year. As a result, the total market cap of all cryptocurrencies fell from less than $3 trillion to less than $1 trillion.
federal reserve risk
The price of bitcoin has dropped drastically this year because of the Federal Reserve. After being wrong on inflation in 2021, the Fed launched its most aggressive policy on record. It decided to introduce a quantitative tightening policy to reduce the amount of money in circulation.
At the same time, the Federal Reserve decided to hike interest rates. In the first eight months of the year, the bank increased interest rates by 225 basis points. And in recent statements, officials warned that more rate hikes were necessary unless inflation showed signs of a continued decline.
Historically, the price of bitcoin tends to weaken during periods when the Fed is extremely aggressive. The same is true for other types of assets, such as stocks. Indeed, most US indices, such as the Dow Jones and the S&P 500, have lost more than 10% this year.
The dwindling interest among retail traders also led to a fall in the price of bitcoin. This is evidenced by overall weak financial results and falling volumes by major companies such as Coinbase, OKEx and Binance.
As you will remember, 2021 was a good year for US retailers who accumulated huge savings while working from home. At the same time, the federal government provided trillions of stimulus money, including stimulus checks. Most of these funds went to cryptocurrencies.
As a result, on-chain data shows that bitcoin trading volume has been in a strong declining trend lately.
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bitcoin price prediction
The weekly chart is a good place to determine whether bitcoin is a good investment now. as shown below. The chart shows that BTC price is forming a double-top pattern at around 64,000. The neckline of this pattern was 28,397. In price action analysis, a double-top pattern is usually a bearish signal.
At the same time, the coin has moved below the 25-week and 50-week moving averages. Therefore, I suspect bitcoin will continue to drop as sellers target the next reference level at $12,364. Therefore, I would not recommend buying bitcoin at this time. In addition, the Fed remains committed to continuing its aggressive policy.