Cluster Analysis of the Crypto Market
Negative Influences on the Crypto Market in 2022
Initial projections predicted that Bitcoin would hit price highs of up to 100,000 USD in 2022. However, it is experiencing a bear market condition, with its value at 40,000 USD falling by more than 25% from its peak value of 68,000 USD. The strong positive association between Bitcoin and other Altcoin means that the weaker coins are experiencing a similar fate which puts the market in a recession. The current crypto market cap of 1.87 T USD is a massive decline from its 2T USD value a year ago and 3T USD six months ago. The following are reasons for the slump:
Cryptocurrencies are Affected by the Stock Markets
The crypto market is experiencing continued suffering with the increasing interest rates around the world to keep up with high inflation. The suffering global stock markets are weakening BTC, ETH, and other altcoins that sustain the crypto market. Additionally, the negative correlation of the crypto market to the USD is hurting Cryptocurrencies. The strengthening of the dollar due to high demand amid the global recession is bound to cause negative price movement for the crypto market.
The uncertainty around the Russia-Ukraine conflict is also impacting the global economy and the crypto performance, by extension. The war is detrimental to investor sentiment because no one wants to risk volatile crypto assets under uncertain market conditions.
Government Regulations and Bans on Crypto in the Asian Markets
Governments' introduction of strict regulations on crypto use is a turning point in the market's fortunes. The Asian crypto market experienced the biggest hit when China banned cryptocurrency transactions and mining last year. India also implemented laws to enforce taxation on Cryptocurrencies, joining China to effect a great Asian crypto market regulation ring. The two countries have up to 35% of the world's world population and hold the single largest crypto market share.
China and India's restrictions on crypto operations caused negative market sentiment among investors and traders. The result is that the global crypto ecosystem suffered greatly, with the effects becoming visible in 2022.
However, prospects of Cryptocurrencies recovering from the present recession are high due to a number of reasons:
Been there, done that!
The crypto market previously experienced its bull moment towards the end of last year, making its return to similar levels realistic. Its highest market cap stood at a staggering 3.3T USD in November 2021, after which it experienced a slump. The fluctuations mean that the market will experience an upsurge at one point during 2022.
Despite the current situation, analysis of the moving averages of the crypto market will show a positive bigger picture. The arithmetic means of the crypto market capitalization data sets from previous years indicate that the trend is normal. Therefore, it is factual to predict better times.
New Crypto Entrants in Africa
The African continent is waking up to the global need to embrace Cryptocurrencies for efficient and secure local and global trade. The move to crypto trading in Africa is evident as The Central African Republic accepted BTC as legal tender in 2022. The country is expected to reap from its brave stand by witnessing increased foreign trade with the efficiency and security of blockchain technology.
The emergence of Kenya on the crypto stage cannot be ignored since it is among the biggest peer-to-peer trading forces in Africa. The country's rampant development in technology and innovation promises to boost the crypto market share of the continent while clearing the path for other African nations.
Major Brands are Interested in Trade Using Cryptocurrencies
The support for crypto trading by the biggest business owners and entities around the world sends a message of intent to make it successful. The public support for DogeCoin by Tesla owner Elon Musk on his recently acquired Twitter platform triggers positive sentiment for the asset. The acceptance of big brands to receive payments for products and services in crypto is set to tilt the balance in favor of the crypto market.
Author’s Thoughts!
The crypto market is in a difficult position due to the global recession and the unrest due to international relations. The 30% tax on crypto trading in India and China banning crypto activities is a major setback to the industry.
It is important to notice the new crypto startup projects by youthful individuals who wish to exploit the equally profitable ecosystem despite the challenges. The gradual entry of Africa into the scene is a move that will bring a major customer base to help compensate for the Asian numbers lost. The market is still showing promising signs of recovering from the present stalemate to achieve projected highs.