Crypto Global

Bitcoin News – Week 4, 2022

Jan 25, 2022

Bitcoin has lost value since last Friday when looking at what is known as the trade-weighted dollar rate. Last year, Bitcoin hit an all-time high of over $67,000. But on Friday it fell below $35,000. And it's not just Bitcoin. Some of the biggest names on the blockchain have traded in the red. Is the Bitcoin bubble bursting now?

Some blamed Russia's central bank, which proposed a ban on cryptocurrency trading and mining on Friday, as a ban by China last September had a similar effect. And then there's the potential Federal Reserve rate hike that has markets firmly in its grip. So if interest rates rise, overall spending is likely to fall. Safer investments are now attractive such as bonds and fewer investors are expected to trade off leverage causing uncertainty in the markets.

But there are also a number of other factors that have inversely influenced the price. The Fear and Greed Index shows that fear is still very high. At the time of writing, the fear stands at 13.

So there is a lot of fear in the market. Anyone who is aware of this basic market psychology can benefit greatly from contrarian trading when trying to make a trade. It's one of the oldest stock market wisdoms and still seems to work very well. Fear and greed are part of human nature.

Interestingly, Bitcoin hash rate and mining difficulty are at all-time highs despite the price drop. Less than a year after China banned bitcoin mining, which caused a nearly 50 percent downtrend in May 2021, the bitcoin mining hash rate has fully recovered and hit a new all-time high.

The Bitcoin hash rate is one of the most important indicators of the strength of the network. A high hash rate capacity indicates strength, security and stability. Traits that endear many investors to Bitcoin. On the other hand, low hash rate capacity could shake the entire market. There has always been a relationship between the hash rate and the price of cryptocurrency. In most cases, an increase in hash rate usually precedes a corresponding price increase, but there have been exceptions where prices have increased before the hash rate.

Russia is the world's third largest player in bitcoin mining after the United States and Kazakhstan. Russia's proposed ban is the latest step in a global crackdown on cryptocurrencies, as governments from Asia to the United States fear privately operated and highly volatile digital currencies could erode their control over financial and monetary systems. Russia has argued against cryptocurrencies for years, saying they could be used to launder money or finance terrorism. Finally, in 2020, Russia gave legal status to cryptocurrencies, but banned their use as a means of payment. In a report published on Thursday, the central bank proposed preventing financial institutions from carrying out any operations with cryptocurrencies and said mechanisms should be developed to block transactions aimed at buying or selling cryptocurrencies for fiat currencies.

Overall, we see exchanges that are heavily influenced by current politics and therefore put a lot of pressure on different asset classes such as corporates, real estate, commodities or cryptocurrencies like bitcoin. However, just looking at the fundamentalist facts about Bitcoin, one concludes that there is no reason to sell the given asset during this market panic.