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The sharp fall of Bitcoin and Ethereum in the last seven days; what is the reason?

سقوط شدید بیت کوین و اتریوم در هفت روز گذشته؛ علت چیست؟

The digital currency market has started the new week with a bearish situation, and Bitcoin and Ethereum, as the main currencies, have reached their multi-month price floors. Analysts say that now that Ethereum’s merge update is over, the void of an influential bullish mover is felt in the market.

To Report CoinDesk, the price of Bitcoin fell below $18,300 today, which is the lowest level since June 19 (June 29). Ethereum, which recently underwent a change in its blockchain technology, the Marj update, reached its lowest price in two months at $1,280. The total value of the digital currency market has fallen to 858 billion dollars, which is the lowest level since mid-July.

Matthew Dibb, co-founder of Stack Funds, says:

The bullish drivers associated with digital currencies are now very limited and we may see Ethereum fall to its annual price floor in the coming months.

Referring to the approach of “buy with rumors and sell with news”, which is now a clear example in the Ethereum market, Dib added:

To understand traders’ sentiments towards risky assets [مثل ارزهای دیجیتال]It is enough to look at the growth of the dollar index and of course the current situation of this index is not in favor of these stocks.

The dollar index or “DXY”, which compares the value of the US dollar with a basket of major national currencies, returned to above the 110 level last week and reversed the downward trend of the previous week. This change of phase was influenced by the publication of inflation rate statistics for the month of August (August) in the United States; That is, because August inflation was higher than expected, the hypothesis of the return of the country’s central bank from contractionary monetary policies was also rejected, and speculations about the continued increase in bank interest rates in this country increased.

The sharp fall of Bitcoin and Ethereum in the last seven days;  what is the reason?
The significant growth of the US dollar index since the beginning of 2022.

Brian Cubellis, a researcher and analyst of the Coinbase collection, said that hedge funds active in the field of digital currencies have reduced their investment risk by reducing their Bitcoin and Ethereum balances immediately after the publication of the US inflation statistics last month.

Laurent Kssis, digital currency trading consultant at CEC Capital, pointed out that bearish currents in the digital currency market continue to hold sway.

New short (sell) trading positions on centralized exchanges and especially platforms that host derivatives markets put pressure on prices. This is happening before the decision of the Central Bank of America is finalized at the end of this week. The central bank is expected to increase the interest rate by 0.75 percentage points in this period, but a one percentage point increase is still one of the options on the table.

Bobby Ong, co-founder of the CoinGecko platform, said that predictions of the US central bank’s continued contractionary monetary policies have led to preemptive selling of risky assets such as stocks and digital currencies.

Downstreams are evident from the negativity of the base rate (the difference between the price in the spot and futures markets) of Ethereum and Bitcoin, which is referred to as a “discount” in the futures markets. Currently, one-month Bitcoin and Ethereum futures contracts are traded on exchanges with a one percent discount compared to the spot market price.

Since the beginning of this year, the Central Bank of America has increased the bank interest rate by 2.25 percentage points, which has caused instability in the market of high-risk assets, including digital currencies.

John Pangilinan, one of the directors of Signum Capital Group, said that the excitement about the update of the Ethereum platform has now died down and there is still no sign of large institutional investors entering the Ethereum market. Pangilinan says this situation leaves Ethereum vulnerable to massive investor selling.

The price of Ethereum reached $2,000 with an increase of about 100% in the 4 weeks ending in mid-August, and some analysts say that one of the main reasons for this growth is the purchase of Ethereum among investors with the intention of receiving fork tokens based on proof of work. Blockchain (ETHW) has been.

On-chain data also confirms that Ethereum and other digital currencies are not facing special support in their downward path.

Andrew Thurman, an analyst at Nansen, wrote in the company’s weekly report:

The flow of Ethereum deposits to exchanges has not stopped yet. These intra-chain flows are a reflection of the economic conditions in macro dimensions. the war [بین روسیه و اوکراین] In Europe, it has not stopped yet and the energy crisis in this region is emerging. The Federal Reserve is still planning to increase the bank interest rate once again and we may see an increase in the number of cases of corona disease in the winter season. This situation looks miserable and I don’t see any upward stimulus in front of me.

The sharp fall of Bitcoin and Ethereum in the last seven days;  what is the reason?
Chart of net movement of Ethereum in digital currency exchanges (click on the image to view the index in Eurovision).

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