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Crypto markets look to gain after tough week

By Robert Davis

22:08, 14 January 2022

Businessman standing on flying bitcoins
- Photo: Shutterstock

The cryptocurrency market ended Friday’s trading session on a high note following a tough week that saw more than $300bn (£219.33bn) wiped off its total market capitalisation.

Investor sentiment remained fearful after the US Federal Open Market Committee (FOMC) meeting last week at which time the central bank discussed paring down its $8.3trn balance sheet.

Meanwhile, Federal Reserve chair Jerome Powell told US federal lawmakers during a hearing this week on Tuesday that the bank is prepared raise interest rates multiple times to tame inflation.

Bitcoin ended the week up more than 3% to $43,276 per coin. Other popular assets like cardano and polkadot outgained bitcoin.

Cardano saw a more than 4% gain on the week and finished at $1.28 per coin while polkadot saw a greater-than 6% gain up to $27.22.

FOMC meeting

Even though the FOMC meeting took place more than a week ago, it still dominated this week’s trading session.

The threat of rising interest rates often reduces investor sentiment in risky assets like cryptocurrencies and digital tokens. This caused the market to suffer a greater-than 10% selloff over the weekend, with bitcoin trading near $40,000 by Monday morning.

This threat also affected technology and growth stocks on the New York Stock Exchange as the Nasdaq Composite Index dropped by more than 3% since its close on Tuesday.

Geopolitical woes

Outside of the US, geopolitical woes helped drag the market downward.

Kazakhstan’s government has been dealing with riots in the wake of its decision to lift state-imposed price caps on imported oil, thereby nearly doubling energy prices in the country over night.

BCH/USD

370.95 Price
-1.560% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.50

DOGE/USD

0.11 Price
+0.990% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.0012872

BTC/USD

60,129.60 Price
+2.560% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

ETH/USD

3,199.58 Price
+1.070% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00

In response, the government shut off the country’s internet, causing the country’s cryptocurrency miners to suffer. Prior to the unrest, Kazakhstan accounted for more than 18% of the world’s crypto mining market.

Elsewhere in eastern Europe, Kosovo announced a country-wide ban on cryptocurrency mining.

However, publicly traded mining stocks such as Riot Blockchain, Hut8, and Marathon Digital Holdings weren’t affected by the headlines.

Riot Blockchain finished the week up more than 7% to $20.68 while Hut8 and Marathon Digital gained 6.6% apiece.

Long-term holders gain

One reason why analysts Genevieve Yeoh and Joo Kian at Delphi Digital are bullish on next week’s market is the persistent inflation in the US.

According to the latest figures from the Bureau of Labor Statistics, inflation increased by 7% on an annualised basis in December, the highest rate in more than four decades.

Meanwhile, the dollar index slumped to a two-month low which caused a “modest relief rally,” the analysts said.

Looking ahead to next week, the analysts expect crypto prices to continue their upward trend after long-term holders bought the week’s dip.

“On-chain data shows that throughout January’s price slump, long-term holders have accumulated bitcoin after months of offloading bitcoin at the end of last year,” the duo wrote in a note to investors. “A rise in long-term holder accumulation could be a positive indicator for bitcoin price.”

Read more: What comes next after the recent bitcoin price crash?

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The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
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