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Are we headed towards a recovery or a ‘crypto winter’?

by LLT Editor
13th May 22 11:44 am

Cryptos are bouncing back with Bitcoin breaking back above resistance turned support at the psychological $30,000 level, while ether is also enjoying strong gains. However, Bitcoin is still down by more than 55% since the November highs, with losses accelerating since the start of April.

Equity market losses, concerns about inflation, and instability in the stablecoin market have sent shockwaves throughout the crypto complex this week, prompting fears of a ‘crypto winter.’

Victoria Scholar, Head of Investment, interactive investor, says: “However – with the Nasdaq managing to close in the green last night, and the S&P 500 narrowly avoiding a slump into bear market territory (down 20% from the recent high), opportunistic buyers have scooped up cryptos at a discount overnight. $30,000 remains the key technical level to watch on Bitcoin, with a sustained drop below potentially paving the way for further declines.

“Recent price action serves as an important reminder of the wild swings that are characteristic of the crypto market that can on the one hand can create outsized gains for traders and investors but can also lead to damaging losses.”

A timely reminder of the risks

Myron Jobson, Senior Personal Finance Analyst, interactive investor, adds: “Bitcoin and other cryptocurrencies have recovered some lost ground, providing a much-needed reprieve for crypto investors after weeks of decline. Whether the uptick in performance is indicative of a full-scale recovery remains to be seen.

“What direction the price of Bitcoin and other cryptos will follow is anyone’s guess, but they remain a swashbuckling ride for investors. The recent crypto slide is a timely reminder that shows that just because something has perceived value, it doesn’t mean it can’t end up massively overvalued and in a bubble.

“ii research found that 45% of young adults aged between 18 and 29 have made crypto their first investment of choice, with an alarming number funding this through a cocktail of credit cards, student loan, and other loans. The reason this is such a concern is that many have been hit with a double whammy of investment loss and a deeper plunge into debt. And of course, the debt issue is made worse with rising interest rates.”

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