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The sharp decline in the value of Bitcoin and other major cryptocurrencies is attributed to three interrelated factors, according to analysts from Wintermute.
As the first reason, experts pointed to disappointing financial reports from major technology companies. The results from the so-called “magnificent seven,” particularly Microsoft, have let down investors and raised doubts about the sustainability of the anticipated growth in the artificial intelligence market, which had previously bolstered demand for riskier assets.
The second trigger was the nomination of financier Kevin Warch for the position of head of the U.S. Federal Reserve (Fed). The crypto market initially interpreted this news as a signal of potential tightening of policies by the primary American financial regulator, which intensified pressure on cryptocurrencies and other high-risk assets.
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The third factor identified by analysts was the significant drop in the prices of precious metals. The decline in gold and silver prices triggered a wave of position closures by traders, affecting a wide range of assets, including digital currencies.
Wintermute noted the emergence of a full-fledged bearish trend: digital assets are showing markedly worse performance compared to traditional assets. Furthermore, the current crisis differs from previous cycles. Its causes are rooted in economic processes and a natural reduction in debt burdens, rather than the collapse of major players like the cryptocurrency exchange FTX, the analysts from Wintermute explained.
Experts believe that the market infrastructure has become more resilient over the past few years, and the interest of large corporations in cryptocurrencies has not vanished but has shifted to a wait-and-see phase. They assess that Bitcoin is currently in a “price discovery” phase, and market recovery could occur in the latter half of the year when the U.S. Fed’s policies become clearer.
Previously, economist, founder, and CEO of Real Vision Raoul Pal stated that the primary reason for the decline in the Bitcoin market is the lack of capital for cryptocurrencies within the U.S. economy, and the issues within the crypto industry are not to blame.
