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Crypto Market Forecast: Week of January 24th 2022

Crypto Market Forecast: Week of January 24th 2022

A curated weekly summary of forward-focused crypto news that matters. This week, markets tumble as fear over global macro conditions continues to spook investors, the White House plans to issue a crypto regulation strategy, and the Solana blockchain suffers another outage.

The price of Bitcoin (BTC) is now down almost 50% from the all-time highs it touched in November 2021 to trade around the US$35,000 price level. It has been a challenging week of trading in digital asset markets and the Brave New Coin market cap table is painted a deep red.

BTC ends the week down ~18% while Ethereum (ETH), and Binance Coin (BNB), the 2nd and 3rd largest assets in crypto, both end the week down a stark ~27%. Wealth has been flushed out of the crypto markets and assets considered the most ‘risky’ have suffered the biggest losses.

Crypto markets continue to be dragged down in 2022 by negative macro tailwinds that are decimating confidence across risk markets. Signals from the US Federal Reserve that quantitative tightening and interest rate hikes will arrive later this year are nudging investors towards safe, stable investment options and away from high-risk, high-return investment options such as equities and crypto.

Parallel to the rout in crypto markets, the tech stock market had its worst week since March 2020. The tech-heavy Nasdaq 100 is down ~5% in the last week with heavyweight stocks like Netflix down more than 20%.

Michael Novogratz, the CEO of Galaxy Digital, commented on ETH’s deep price fall on Twitter. “This will be a year where people realize being an investor is a difficult job,” he said. Across the board, investors in both legacy and crypto markets this year will likely be impacted by macro narratives such as historically high global inflation and a reversal of unsustainable dovish macro policies undertaken by central banks.

Compounding the bearish macro conditions, crypto investors have been spooked by moves made by global regulators and lawmakers in the last week.

Bloomberg reported on January 22nd, that the Biden administration is preparing to release an initial government-wide strategy for digital assets. According to the publication, senior officials have held multiple meetings around the plan and it will be implemented as an executive order.

It is reported that the plan is set to put the White House at the center of cryptocurrency administration in the country. So far there has been a scattered approach to regulation of digital assets in the country, with various agencies like the SEC, CFTC, and the Department of Justice separately handling cryptocurrency-related legal issues in recent years.

Industry players in the US have for some time complained about the lack of coherent government-level directives surrounding crypto. A single strategy for handling crypto led by the White House may be something of a boon. Market observers, however, are looking at the news as potentially bearish. It may mean ring-fences around the buying and selling of crypto in the US and increased regulation that may hinder the growth of the industry.

On Thursday, the central bank of Russia proposed a full, blanket ban on the use and mining of cryptocurrencies. They have cited threats to financial stability, citizens’ wellbeing, and monetary policy sovereignty as reasons behind the proposals.

Crypto news for the week ahead

23rd January- Kotti testnet launches on Ethereum Classic

Kotti, the final testnet before the launch of the major Mystique upgrade on the 13th of January. The Mystique upgrade will mirror the London upgrade that occurred on the Ethereum network. It will begin the burning of ETC tokens generated through transaction fees and may increase the store-of-value appeal of the token because of the new deflationary implications. ETC is down ~23% in the last 7 days.

31st January- Bitfinex delists 6 trading pairs

On Sunday, crypto trading giant Bitfinex will officially delist the 6 trading pairs that cover the Basic Attention Token (BAT), pNetwork(PNT), Streamr (DATA), and Metaverse (ETP) tokens. Bitfinex explains that it is removing these pairs because of low liquidity. The exchange writes that the removal of the markets will enable “a more streamlined and optimized trading experience” for users.

Top 10 Crypto Summary

Marcap 2401-min

It was a brutal week of trading for large-cap crypto assets. Most assets suffered heavy double-digit losses. A notable loser was Solana (SOL) which dipped by ~32% in the last week. Solana suffered another network outage last week caused by congestion created by spambots. The outage adversely affected users of Solana lending protocols like Solend who could not cover collateralized positions and were forcibly liquidated.

Bitcoin Price Chart

BLX 2401-min

The last week in crypto trading markets was defined by a stark 3-day price drop that began on the 20th of January. Crypto market data providers reported on a few key fundamental changes preceding the drop that may have been contributors. In the lead-up to the drop, there was an increase in the ratio of whales (large holders) on exchanges and an increase in the activity of old-school BTC holders. This suggests that both these powerful groups were trying to sell during the drop.


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