Crypto Market Poised For Volatile July & August

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What will happen in the crypto markets as Q3 of 2022 unwinds? The only way for investors, traders, and all-around crypto enthusiasts to make an educated guess is to do a deep dive into what’s been going on during the past few months with the entire sector. Like the stock market, cryptos have experienced record falls.

However, it’s crucial to note that assets like bitcoin (BTC) and Ethereum (ETH), the two leaders of the segment, routinely display wild bouts of volatility. Stock market watchers are not nearly as accustomed to the huge price swings that are all in a day’s work for devotees. Still, that’s not to diminish the seriousness of how quickly BTC and other benchmark coins have nose-dived in recent weeks. What is the story behind the situation with crypto, and what are experts suggesting at this time?

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Q2 2022 hedge fund letters, conferences and more

Immediate Issues

Inflation in developed nations has already reached levels not seen in a half-century. Likewise, national banks, particularly the US Fed, have been upping interest rates in a mad dash to stifle inflationary pressures. The tactic usually works well but is not delivering the goods this time around. Already, the FED and some European banks have increased prime rates only to watch as inflation continues to soar. The net effect of the double-edged inflation interest sword is less money in consumers' pockets. That scenario routinely translates into tighter personal budgets and less cash for investing in things like stocks, cryptocurrency, and precious metals.

Fortunately, many investors realize that they can potentially play the crypto market in either direction, even speculating on downward price movements in the same way that other traders short individual stocks.

“Investors who tend to buy and sell BTC or any similar digital assets via brokers may be open to see returns on charts that are intensely volatile at the moment,” says Dáire Ferguson, CEO of AvaTrade, an online forex trading and CFD broker platform.

The goal is to make accurate predictions about the direction of prices, so it doesn't matter whether they're going up or down. This fact is significant for two reasons. Not only does it spell opportunity in a see-saw marketplace, but it opens the doors to traders and investors who prefer the chance to ride the characteristic waves of BTC prices.

Bitcoin's Big Drop

The major headline in financial media outlets in June was the 63% drop in bitcoin's value. Because BTC is the sector leader, most others experienced similar declines. But what's often not said out loud is that BTC and its crypto cousins are not new to such jarring price swings. In fact, previous bear markets saw bitcoin and other top cryptocurrencies fall by as much as 80 percent from recent highs.

Ferguson shares that “crypto traders need to consider a variety of changing patterns. We’ve seen this in the past as well, where the stock market starts to bottom out, and digital assets are pulled along. The aggressive interest rate hikes, inflation and a looming recession are all key factors to consider when placing your bets in the crypto market right now.” Some novice investors have in recent times found success with AvaTrade's cryptocurrency trading account, as volatile market swings are shaking up to become more frequent in the bear market.

How does that data compare to the current situation? As of the close of Q2 2022, BTC's drop-off has taken about 63 percent of its total value. Putting those raw numbers into perspective, it's possible that the leading coin could move downward for another 17 percent from recent highs and reach a value of approximately $13,500. That price would represent an 80% reduction from $67,802, which was bitcoin's price in November of 2021.

Support At $17,700?

For altcoin watchers, it's helpful to try to identify points of resistance and support. In the case of a major price decline, few care about resistance, but most want to investigate logical price levels that serve as cushions against further losses. The June 2022 price data offers a few, but not many, clues for chart devotees. The last few weeks of June saw BTC's low reach all the way down to $17,727.

However, the chart uncharacteristically rebounded from that point and notched a mini-bounce up to the $21,014 point. Both the $20,000 and $17,000 levels are important psychological marks for the sector leader.  Whether $17,700 will serve as a new support level will be tested during Q3. If it holds, that could mean the entire crypto universe has had enough price declines and is ready to trade sideways for a few months or stage a small rally and recover some of the recent losses.

Widespread Consumer Acceptance

Two bright spots in an otherwise dreary quarter for cryptos have been consumer acceptance and widespread use by retailers. Each week, more online and traditional retail merchants update their website pay portals to reveal new accepted methods of payment. Many add bitcoin and a handful of other top coins to the mix. This phenomenon has been a routine one for the past few years in dozens of countries.

“Perhaps that’s what the market needs right now, a mature transition and acceptance of widespread use, whether it’s in the retail sector, or personal finance. Yet, a slow and steady transition could help traders and users feel more comfortable with the shift in finances, rather than having the system being overrun by novice and unprofessional traders looking to hop out when market conditions start to sink.”

It signals a growing admission on the part of sellers that cryptocurrency is here to stay. On the consumer side of the ledger, more individuals are buying small amounts of BTC, Cardano, cake, and other trending coins when they open accounts on the major online exchanges. Often considered dabblers rather than investors, the many who show interest in the new form of non-fiat currency are proof that cryptocurrency might suffer a market reset in terms of price but will always be part of the monetary scene.