Cryptocurrency prices have been falling in recent days, leading investors to question the reasons behind the decline and whether now is the right time to buy. In this article, we’ll examine why crypto prices are falling today and provide insight into whether buying the dip in February 2023 is a good investment strategy.
Macroeconomic Factors Are Main Reason Why Crypto Prices Are Falling Today
The Federal Reserve Chair, Jerome Powell, recently hinted at the possibility of more interest rate increases due to the rising employment figures in the United States. Speaking at The Economics Club of Washington DC, Powell stated that the Fed will base its actions on incoming data–and if the economy continues to show strength through higher jobs and inflation reports, more rate hikes may be needed.
BofA expects headline inflation to accelerate to 0.44% on Tuesday, while core inflation should remain sticky/increase slightly. However – the decline in core goods (which Powell keeps bragging about) will probably come to an end soon as used car prices are accelerating again. pic.twitter.com/zCwdmFue5P
— GammaLab (@gammalab_tweets) February 9, 2023
Powell believes that inflation will persist for some time and that the Fed may need to implement multiple rate increases before determining if they have taken enough action.
Last week, Powell noted the early stages of disinflation in the goods sector. However, the unexpected strength of the labor market data has sparked concerns about further inflationary pressures.
In January, American non-farm jobs also saw a significant increase of 517,000, outpacing the expected 185,000 and nearly doubling the number recorded in December. Powell acknowledged that the strength of the employment data was surprising and stated that if the economy continues to perform better than expected, the Fed would take additional action and raise rates accordingly.
The cryptocurrency market, like stocks and all risk assets, will no doubt continue to be impacted by the Federal Reserve’s interest rate decisions. A rise in interest rates can lead to a decrease in consumer spending and a slowdown in the economy, which may negatively impact the crypto market as investors flee to cash and risk-averse assets.
Powell’s hints at more interest rate increases in response to the strong employment figures are likely to be having a significant impact on the cryptocurrency market, but other factors may be having even more impact presently.
SEC Crackdown on Staking: Another Reason Why Crypto Prices Are Falling Today
The U.S. Securities and Exchange Commission (SEC) is reportedly considering a ban on retail investors participating in cryptocurrency staking. This news has sparked concern in the market and debates about the future of cryptocurrency investment in the country.
BREAKING: Kraken, one of the world’s largest cryptocurrency exchanges, is facing an SEC investigation into whether it offered unregistered securities to US clients https://t.co/Go1tIqH8vv pic.twitter.com/nsKOMlbiAO
— Bloomberg Crypto (@crypto) February 8, 2023
Staking is a popular way for users to earn income by depositing proof-of-stake tokens to secure a blockchain network. However, the SEC’s recent examination of broker-dealers and Registered Investment Advisors (RIAs) has heightened fears of a crackdown on staking, particularly in light of the collapse of several major players in the industry.
The SEC claims that its aim is to ensure “adequate risk management and standards of care” in the crypto industry. This regulatory uncertainty is another reason why crypto prices are falling today.
Bitcoin’s Death Cross: Secondary Reason Why Crypto Prices Are Falling Today
A rare event is about to occur on Bitcoin’s price chart: the weekly moving average (MA) 50 is about to cross below the weekly MA 200, known as the bearish death cross. Some investors fear this signal could indicate a long-term bear market.
Despite this ominous signal, however, some analysts believe that the death cross is based on backward-looking moving averages and that much of the sell-off has already occurred. Recent news of the SEC investigating cryptocurrency exchange Kraken for allegedly breaking securities laws, along with comments from Fed officials regarding the outlook for the U.S. economy and monetary policy, may be the main reasons why crypto prices are falling today.
Taking a look at the daily timeframe, Bitcoin recently fell to a low of $22,362, before rebounding to trade at around $22,508 as of writing. A bearish divergence can be observed from the volume and RSI, which could indicate that the leading cryptocurrency may be heading to lower levels. A breakdown of the $22,000 level of support is a potential confirmation of the divergences.
With all these factors in play, it’s understandable that investors may be cautious about buying the dip in the crypto market. However, it’s important to remember that the market is known for its volatility and the bearish death cross may not necessarily mean a long-term downtrend.
Despite the crypto markets being in a downtrend and market decline, cautious investors may still be contemplating buying the dip. It’s essential to assess all aspects before making an investment decision. If you’re considering investing, it’s prudent to watch for key levels of support that will indicate if Bitcoin and altcoin cryptos can recover from BTC’s current bearish death cross.
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