The crypto market performed poorly in 2024, as experts forecasted in the year before. And although Bitcoin is expected to come back to its senses, we can’t help but wonder why it is that so many things are affecting the cryptocurrency despite its strength.
The reason why Bitcoin is so discussed is because altcoins are firmly linked with its performance, so if BTC is down, all other coins, including Ethereum, will experience a difficult time. This is also the case because most investors have mainly bitcoins in their portfolios, while different types of assets are an extension meant to minimize risks and spread out investments.
Unfortunately, since it’s not yet regulated, Bitcoin is suffering numerous challenges, and we don’t know when governments and financial bodies will finally add cryptocurrency as a legitimate form of payment and exchange between users. Even though there is demand, and
Bitcoin is used all around the globe, the uncertainty and fear of volatility put a barrier between investors and institutions. But this impacts Bitcoin’s price.
The US SEC and its continuous decision delay
The US Securities and Exchange Commission (SEC) is battling the crypto market by trying to regulate it in accordance with current economic systems. It changed the entire crypto adoption framework by requiring all exchanges to have a license by the end of the year. Still, it constrained one of them to give up all digital coins except Bitcoin to impose their regulatory authority.
The SEC has also delayed its decision for some time regarding BTC ETFs, despite its deadlines, to gather more public opinions about the new asset. In a recent report, the institution wanted to learn if investors believe ETFs are prone to manipulation and if ETFs’ liquidity levels might lead to this event. Even if numerous digital companies filed their proposals for futures contracts applications, many are left with no feedback until the SEC finally makes a decision, which is most likely to happen in 2024.
What’s more worrying is that the SEC stated they’d continue watching crypto, meaning investors will definitely be more limited in regard to buying, selling or trading crypto. The establishment considers that all crypto exchanges are developing elaborate schemes to win money off of people’s investments. The battle continues as the SEC sees cryptocurrencies as securities that fall under their responsibilities.
US recession shows significant impact on cryptocurrency
Recession is one of the most feared this year because the previous one had a significant impact on the world. Although experts predict a mild risk of recession, the threat is still lying around. What’s worse is that a US recession will definitely influence the market globally, so investors may choose to lower their input in Bitcoin and other coins as a way to save their assets for emergencies.
Some consider that a recession might lead to a bullish market in crypto, where the prices of crypto would skyrocket, and the demand for high-risk assets would also change. If the government’s failure causes an economic crisis, crypto might win ground in regard to blockchain technology as they would prefer using blockchains for their financial services instead of traditional companies. But this is only a supposition, after all.
The next Bitcoin halving is also concerning
Bitcoin halvings are necessary, but as the digital currency changes considerably, it’s starting to be less of a good thing. During these halvings, the block reward is downsized and cut in half ―meaning that it will reach ground zero at some point. Unfortunately, halving can be pretty stressful for miners because they might have to lower electricity costs since their revenues will be lower, and BTC production costs will increase.
Bitcoin mining is already pretty tricky, as miners must purchase expensive and powerful computational power to leverage decent results. At the same time, their income should exceed the electricity bills as these mining rigs consume an incredible amount of energy, and some are running 24/7.
BTC halving will also lead to an explosion in prices, which is why investors and experts say this is the best time to buy Bitcoin before the next halving in April 2024. Still, the crypto market is currently down, so investors are caught in a sensitive time to invest and build their portfolios.
The FTX failure still lingers in the crypto market
In 2021, when the entire crypto market crashed, and exchange platforms faced difficulties, FTX seemed perfectly fine, continuing its usual transactions and tasks. However, one year later, when the company had a blast, it was revealed that FTX was a scam, and all customers and investors whose money was apparently safely handled were directed to a crypto trading firm in Hong Kong.
The company’s balance sheet was exposed, and the business seemed to borrow money from FTX’s customer funds. As a result, many users withdrew their money as fast as possible, leading to an immediate crash of the company. FTX also tried stopping customers from taking their money back by eliminating that option online.
All these events led to criminal charges and lawsuits that are currently ongoing. But the effect on the crypto market is still around. After the bankruptcy announcement, the demand for crypto decreased immediately, and even though it went back up after some time, people are now more skeptical than ever to invest in Bitcoin and other assets.
Moreover, the SEC strengthened its legal framework on using crypto freely because the estimated asset loss was around $8 billion, and only $5 billion was recovered. Therefore, investors will now think twice before using any digital service to handle their cryptos.
How will Bitcoin evolve in these conditions?
Bitcoin’s performance is at its lowest, and numerous institutions are putting it down, along with other coins. The SEC demands a specific regulatory ecosystem, while the recession makes investors fear using digital currencies for income. At the same time, repeatedly failing companies like FTX are drawing too much attention to possible scams that include crypto, after which the demand for it decreases significantly.
