June Crypto Market Outlook – Forbes Advisor

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After a very difficult month of trading, the cryptocurrency market ended May with a high note. However, the crypto market environment is likely to remain a challenge in June.

Cryptocurrency prices have been under great pressure since early 2022 as investors abandon risky assets such as technology stocks. Market participants are increasingly concerned that the Federal Reserve will be unable to curb persistent, high inflation without pushing the U.S. economy into recession.

The minutes of the May meeting of the Federal Open Market Committee (FOMC) suggest that the Fed is ready to offer several 50 basis point (bps) interest rate hikes in the coming months. This suggests that risk-free market sentiment will continue in June.

May Crypto Yield

Bitcoin (BTC) prices fell more than 20% in May to end the month below $ 33,000.

Ethereum (ETH) prices have fallen more than 30%, closing the month below $ 2,000 ahead of Ethereum 2.0’s planned transition from a working test consensus mechanism to a participation testing model later this year.

Popular altcoins Cardano (ADA), XRP, Polkadot and Dogecoin (DOGE) fell more than 30% during the sale of broad-based cryptocurrencies in May. Polkadot prices fell more than 50% in the month.

Bitcoin prices fell more than 32% last year, but BTC held up better than most major altcoins. ETH has fallen 46% so far in 2022. Polkadot prices have fallen 62% this year, while Solana (SOL) prices have fallen 72%.

The cryptocurrency market is bearish

Alkesh Shah, head of digital assets strategy at Bank of America, says cryptocurrency prices have been hit by three major headwinds: high inflation, rising interest rates and the risk of recession. However, he says there is no need for long-term cryptocurrency investors to panic.

“The market has corrected between 40% and 45%, and the media writes as if it were the end of the industry, that we are entering a cryptographic winter,” says Shah.

Instead, Shah believes most major cryptocurrencies are likely to be trapped in a bargaining chip until the U.S. economic outlook improves.

Crypto could step out of its trading range for a couple of solid reasons, Shah says. “… the industry not only has assets with real cash flows, like Ethereum with $ 10 billion in transaction fees last year, but we’re also seeing a big institutional adoption,” he says.

Assisted institutional buyers in May

In fact, institutional investors may be largely responsible for the positive price movement in Bitcoin and Ethereum in the closing week of May.

Marcus Sotiriou, an analyst at UK-based digital asset broker GlobalBlock, says there have been about $ 520 million in cash-backed fund inflows so far in 2022. He says these entries are particularly impressive given the negative price action in the crypto market this year. far away.

“It indicates that institutions and individuals of high net worth have been net buyers throughout this bear market,” says Sotiriou. “I think this is further evidence that, although there are current headwinds, the supply of Bitcoin is being transferred from weak hands to those with long-term conviction.”

The weakness of the cryptocurrency market has eliminated more than $ 1 trillion in value so far in 2022. Fortunately, Goldman Sachs estimates that cryptocurrencies only account for about 0.3% of the wealth of U.S. households.

According to Goldman, a large amount of cryptocurrency is concentrated in the hands of a relatively small number of “whale” investors, suggesting that the sale of cryptocurrencies has had little impact on the economy as a whole or on the wealth of the average American.

Changes in the Stablecoin market

Investor confidence in the stablecoin market was put to the test in May when Luna, which is associated with stablecoin TerraUSD (UST), completely collapsed.

TerraUSD is an algorithmically stable currency that relies on Luna to maintain its $ 1 value. Unfortunately, the liquidation of the cryptocurrency market caused UST to lose its dollar in May, and Luna eventually fell to $ 0.

Terra has already released a new version of Luna as a replacement, but the collapse of the original Luna and UST ended with a combined value of $ 60 billion and raised some awkward questions about how stable currencies really are.

The cryptocurrency market already has a reputation for being extremely volatile and dangerous. Luna’s debacle could undermine investor confidence in stable currencies, which are designed to maintain value and are generally considered among the safest cryptocurrency investors.

The global stable currency market is worth about $ 159.6 million. Tether (USDT) is currently the largest stablecoin with a market capitalization of over $ 72.5 million. Tether briefly lost its link to the U.S. dollar in May as well, as investors withdrew $ 7 billion from the stable currency during the Luna crash.

The big winner of instability in Tether may be USD Coin (USDC). USD Coin’s market capitalization rose from about $ 42.9 billion on May 1 to nearly $ 54 billion at the beginning of June. USDC Circle provider announced in late May that it will begin providing weekly reports on its reserves and liquidity to reassure investors.

Crypto Market moves to see in June

In June, Ethereum will take the next big step in the transition from cryptography to a more energy-friendly participation verification verification system.

The Ethereum network has been running two parallel blockchains since April, its legacy chain that works through the work test and a test chain that works through the participation test.

Ethereum plans to combine the two parallel chains in August in an update it calls “merger. In June, Ethereum plans to upgrade its Ropsten test network to a key merger test.”

The key risk for cryptocurrency investors in the coming weeks may be the possibility that the US economy will soften.

In terms of inflation, investors in cryptocurrencies should be on the lookout for the U.S. Department of Labor’s Consumer Price Index (CPI) report for May, which will be released on June 10th. CPI data will update the market on how well the Fed’s interest rate hikes are working to alleviate inflation.

The June 15 Fed meeting could also be a major driver of the crypto market. Investors anticipate another 50bp rise in interest rates, but any update by Fed Chairman Jerome Powell during his press conference on the health of the U.S. economy could be a major catalyst for the market.

Finally, investors should monitor ongoing developments in the face of cryptocurrency regulation. The chairman of the Securities and Exchange Commission (SEC), Gary Gensler, said in April that the SEC plans to register and regulate cryptocurrencies, and the SEC recently announced that it has nearly doubled the size of its cryptocurrency unit.

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