Bitcoin
BTC$27 686.50

-1.54%

Ethereum
ETH$1 753.83

-2.24%

Tether
USDT$1.002131

0.08%

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BNB$324.49

-3.72%

USD Coin
USDC$0.999458

0.08%

XRP
XRP$0.451417

-1.31%

Why is the crypto market down today?


31 Jan 2023

#Ethereum

The crypto market is down today as Bitcoin and stocks retrace their recent gains and investors await this week’s FOMC and the revelation of the next interest rate hike. The crypto market is down today, as market volatility increases ahead of the Feb. 1 Federal Open Market Committee (FOMC) meeting and a slew of negative news events weigh on Bitcoin, Ether and altcoin prices.

After jumping to new highs for 2023, Bitcoin  retraced a portion of their recent gains.The primary downside catalyst appears to be investors’ apprehension over the upcoming FOMC decision on interest rates and similar pullbacks are also being seen across the stock market which is down.

After the Jan. 18 announcement that the United States Department of Justice levied enforcement action against Bitzlato and ramped-up pressure on certain players in the crypto sector, Binance started to block certain users' accounts. After initially benefiting from a Consumer Price Index (CPI) print which showed inflation slowing beyond expectations in December 2022, crypto and stock prices began to cool as retail data missed expectations and earnings diminished.

U.S. stocks drop ahead of the FOMC

Crypto prices are still highly correlated with the Dow and S&P 500. As mentioned earlier, macro and crypto markets rallied after a better than expected CPI report, but lingering concerns about the health of the U.S. and global economy resurfaced after reported earnings showed a slowdown in corporate profits and consumer demand. Most major banks still expect the U.S. to experience a sharp recession at some point in 2023.

According to U.S. Bank data, there is more pain to come in the economy: “Inflation, interest rates and earnings remain key to equity returns. At present, inflation remains elevated, interest rates are rising and consensus earnings projections for 2023 are trending lower.”

U.S. crackdown with unclear regulations ripples through the crypto market

The cryptocurrency industry and regulators have a long history of not getting along either due to various misconceptions or mistrust over the actual use case of digital assets. On Jan. 18, the US Department of Justice shuttered Russian exchange, Bitzlato and the initial announcement from the DOJ suggested that strong actions would be taken against the crypto sector, but the message was not specific.

On Jan. 30, the top centralized exchange (CEX) by volume, Binance, decided to block some accounts due to the investigation into Bitzlato. While Binance says “funds are safe”, FinCEN listed Binance as among the top Bitcoin counterparties of Bitzlato.

Without a working framework for crypto sector regulation, different countries and states have a plethora of conflicting policies on how cryptocurrencies are classified as assets and precisely what constitutes a legal payment system. The lack of clarity on this matter weighs on growth and innovation within the sector, and many analysts believe that the mainstreaming of cryptocurrencies cannot happen until a more universally agreed upon set of laws is enacted.

While the Commodity Futures Trading Commission (CFTC) has called for clearer regulation, the pace of these changes is unknown. The Biden Administration released a roadmap for cryptocurrencies which suggests preventing pension funds from investing into high risk investments. Risk assets are heavily impacted by investor sentiment, and this trend extends to Bitcoin and altcoins. To date, the threat of unfriendly cryptocurrency regulation or, in the worst case, an outright ban continues to impact crypto prices on a nearly monthly basis.

Regulators have recently turned their eyes to Gemini and Digital Currency Group over the Earn program which can further hinder the crypto market. The trial of former FTX CEO, Sam Bankman-Fried may also set a negative precedent against cryptocurrencies.

Taking profit after Bitcoin’s 44% monthly rally 

Bitcoin and the crypto market have witnessed a strong start to 2023, seeing 64% of BTC investors reach profitability as BTC price reached $24,000 on Jan. 29. Even struggling Bitcoin miners saw massive growth, with revenues rising by 50% to $23 million signaling a recovery for the beleaguered industry. 

While Bitcoin is currently on pace for the best January performance since 2013, the volatility caused by the FOMC may change the results. With Bitcoin and Ether posting January gains of 40% and 32% respectively, some investors may begin locking in profits ahead of the U.S. tax season. Top crypto investors believe more sell-offs are on the horizon and Bitcoin analysts push warnings of the long-term downtrend continuing. There is a CME futures “gap” below $20,000, and some traders expect BTC price to retrace to this level at some point in the future.

In the meantime, investors’ appetite for risk is likely to remain muted, and potential crypto traders might consider waiting for signs that U.S. inflation has peaked, or for the Fed to signal that smaller-sized interest rate hikes are on the cards. A more transparent roadmap for crypto industry regulation would also help to improve sentiment across the sector.


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Top Cryptocurrencies with Price Predictions

# Crypto Prediction Accuracy CVIX Price 24h 7d Market Cap 7d price change
1 Bitcoin (BTC) BTC Bitcoin predictions 72% 51 $27 686.50 -1.54% 12.26% $535 055 944 515 BTC 7 days price change
2 Ethereum (ETH) ETH Ethereum predictions 78.4% 34 $1 753.83 -2.24% 5.65% $214 622 976 485 ETH 7 days price change
3 Tether (USDT) USDT Tether predictions 96% 1 $1.002131 0.08% -0.07% $77 601 370 004 USDT 7 days price change
4 Binance Coin (BNB) BNB Binance Coin predictions 74% 47 $324.49 -3.72% 0.92% $51 234 239 201 BNB 7 days price change
5 USD Coin (USDC) USDC USD Coin predictions 90.8% 2 $0.999458 0.08% -0.04% $34 703 015 524 USDC 7 days price change
6 XRP (XRP) XRP XRP predictions 85.6% 17 $0.451417 -1.31% 23.74% $23 000 119 507 XRP 7 days price change
7 HEX (HEX) HEX HEX predictions 63.2% 82 $0.123358 18.48% 52.30% $21 391 630 916 HEX 7 days price change
8 Cardano (ADA) ADA Cardano predictions 78% 44 $0.369965 -1.76% 12.89% $12 844 876 045 ADA 7 days price change
9 Lido stETH (STETH) STETH Lido stETH predictions 92% 1 $2 941.39 -0.40% -3.32% $10 258 752 564 STETH 7 days price change
10 Dogecoin (DOGE) DOGE Dogecoin predictions 73.2% 57 $0.075005 -1.31% 6.24% $9 950 971 303 DOGE 7 days price change
11 Polygon (MATIC) MATIC Polygon predictions 76.4% 51 $1.12 -1.91% -0.94% $9 797 674 979 MATIC 7 days price change
12 Solana (SOL) SOL Solana predictions 74.8% 54 $21.69 -3.00% 10.97% $8 322 389 970 SOL 7 days price change
13 Binance USD (BUSD) BUSD Binance USD predictions 93.6% 1 $0.999370 -0.05% -0.07% $8 058 942 746 BUSD 7 days price change
14 Polkadot (DOT) DOT Polkadot predictions 72.8% 50 $6.17 -2.34% 2.98% $7 212 834 820 DOT 7 days price change
15 Litecoin (LTC) LTC Litecoin predictions 70.4% 58 $87.92 8.34% 11.30% $6 377 673 020 LTC 7 days price change

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