On May 26, the Fear and Greed cryptocurrency index fell to 12 points, which indicates an extreme level of fear in the market. As early as May 7, the indicator was significantly higher, at the level of 23 points. The next day it dropped to 18, and since May 9 it has fluctuated in the range from 8 to 14 points. The last time the indicator dropped to 8 points was on March 28, 2020, when financial markets fell due to the risks of the COVID-19 pandemic.
On May 8, the collapse of the stablecoin UST, supported by Terra Blockchain, began. The cryptocurrency lost its peg to the US dollar after a one-off sale of about $300 million worth of tokens. The collapse of UST caused the collapse of its pegged altcoin LUNA.
As a result, in early May, bitcoin, ether and many other cryptocurrencies updated their local lows. The first cryptocurrency fell to $26.7 thousand, and Ethereum to $1.8 thousand.
The situation in the cryptocurrency market is ambiguous.
“Bitcoin has a close relationship with the US stock market, which has been falling for seven consecutive weeks. As soon as an active sale of shares begins, market participants immediately sell cryptocurrency,” said Vladislav Antonov, financial analyst at BitRiver.
According to Antonov, buyers are unable to reach the corrective movement to the level of $35,000 per bitcoin. The expert explained that if the $28,000 level fails, then sellers will open the way to the $20-23,000 zone for bitcoin, in which case the crypto winter will drag on until the fourth quarter of 2022.
As for the medium-term prospects, expectations are not so bright, agreed Nikita Zuborev, senior analyst at BestChange.ru. In his opinion, the continuation of the corrective movement is most likely: in the absence of shocks in the market, the rates of the main cryptocurrencies may decrease in the coming months by another 40% of the current level.
“The expected trend reversal is tentatively not until mid-2023. The historical perspective shows that market cycles are approximately 4 years (every 2 years there is a change in the global trend), therefore, even in the face of a declining asset value, there is reason to believe that the value will recover and even grow in the next 2–3 years,” Zuborev concluded .
The fact that it is possible to expect a strengthening of the bitcoin rate by 2023 was also stated by the co-founder of BitCluster Sergey Arestov. He suggested that a new high in the cryptocurrency price is expected by the next halving in 2024.
Legislative regulation of the sector attracts large investors, who now have the opportunity to enter the market and get a good return on the next peak, the expert believes. According to him, corrections cool and heal the market.