December 9, 2022
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Bitcoin

Bitcoin had a 10% reduction, what is behind this market sell-off?

An uncertain macroeconomic scenario and problems in Kazakhstan are being blamed for the market’s downturn.

The first week of 2022 got off to an unfavorable start as Bitcoin fluctuated 10% to the downside on Wednesday. The bears sank the price into the $42,500 zone before closing the slightly higher daily candlestick at $43,200, according to the published by Cryptoslate

BTCUSDT 2022 01 06 09 26 07
Source: BTCUSDT at TradingView.com

With that, the Fear and Greed Index advanced to extreme fear, hitting a low every 15 weeks.

A value below 25 represents a feeling of extreme fear. And while the market has been fluctuating in and around this zone since the end of the fourth quarter of 2021, rising macro uncertainty is a more critical factor this time around.

Bitcoin and stocks are feeling the pinch

The discovery of a new covid variant, called IHU, in France and the Fed announcing an aggressive intention to fight inflation was a blow to cryptocurrencies and equities.

The Federal Reserve is expected to raise interest rates sooner than expected and start reducing its general assets as a second brake on the economy.

US technology stocks were the hardest hit, with the Nasdaq tumbled 3.3% (a loss of 530 points), marking its worst performance since February 2021.

PineBridge Investments portfolio manager Hani Redha said the imminent threat of interest rate hikes has caused investors to abandon speculative technology companies.

Cryptocurrency, widely considered a speculative technology, has also been hit hard. Wednesday opened with a total market capitalization of $2.204 trillion. As the day’s events unfolded, sellers lowered their market cap to $2.043 trillion – a 7% drop in total value.

The biggest losers in the last 24 hours were Internet Computer, Loopring and Axie Infinity, all with losses of around -18%. More than half of the top 100 had double digital losses.

In addition to stablecoins, only APPENDIX backed by Tron managed to buck the trend, posting a 5% gain in the last 24 hours.

Graphic GlobalCrypt
Source: CoinMarketCap.com

While the World Health Organization minimized the threat from the IHU, markets are likely concerned about the potential for new locks to combat the new strain.

Chaos in Kazakhstan

Analysts also blame the events on the Kazakhstan by the retraction in the Bitcoin and cryptocurrency markets.

The doubling of the cost of liquefied petroleum gas has sparked civil unrest in the country. This led to clashes between anti-government protesters and security forces, leading to dozens of deaths and hundreds of injuries.

In addition to imposing a curfew and banning mass meetings, the government has also brought about a nationwide internet blackout.

President Kassym-Jomart Tokayev has imposed a nationwide state of emergency that includes curfews and bans on mass meetings.

Kazakhstan is now the second largest mining supplier with Proof of Work, benefiting significantly from China’s anti-cryptographic stance.

After the Internet blackout in the country, the Bitcoin hashrate dropped 12%.

Along with Kazakhstan’s unreliable power grid, these events spark a debate over the country’s suitability as a major mining hub.

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