The price of Bitcoin has taken a huge nosedive in 2022 especially. The flagship cryptocurrency has declined more than 50% from its $65,000+ all-time high and is now trading around the $20,000 area.
There has been wild speculation around bitcoin since it started its descent, with some crypto community members expressing faith that bitcoin might bounce off major support soon, and trend upwards again.
In contrast, others have expressed more pessimistic views, predicting that bitcoin will likely hit $11,000 before the crypto market sees any kind of rebound to the upside.
However, one thing is certain: Nobody knows where the bottom is.
The fuel for the wild speculation on bitcoin emerged on September 13 of this year, when the US Federal reserve imposed a hike in their interest rates by 75 basis points.
This hike in FED interest rates negatively impacted the crypto market within minutes of hitting the news. Many cryptocurrencies (including bitcoin) took nosedives, with bitcoin landing around the $18,000 level. The market became unstable as retail and institutional investors exited the market in droves due to fear and uncertainty.
As reported in a tweet by crypto monitoring and analysis platform CryptoQuant, institutional investors haven't gotten over their fear yet, and have not started repurchasing bitcoin.
According to CryptoQuant, the Coinbase Premium Index is a simple indicator that measures the rate of institutional investors' interest in bitcoin by calculating the gap between the price of bitcoin on Coinbase and the price of bitcoin on Binance.
The higher the Coinbase Premium Index's value, the greater the ratio of institutional buy trades.
Using this index, analysts can calculate how much institutional interest is flowing into bitcoin and predict what is happening or what will happen.
If one looks closely, the Index's value currently shows an interesting figure.
At a glance, it is easy to conclude that institutional investors are starting to come in. However, while the index shows positive numbers, there is no clear difference between what it is now and what it was in June. The Fund Volume Index has been declining since it was dumped in June, and no special indicators have flashed positive signals yet.
This proves that institutional investors haven't been coming in despite its appearance.
The best guess why this is happening is that a whale deliberately manipulates the market to sell it off into retail after a while.
The prices of cryptocurrencies have already been on a rollercoaster throughout this year. However, FED rate hikes can potentially increase the effects of these rollercoaster rides.
These hikes in interest rates have happened multiple times this year, driving the dollar's value higher against many other fiat currencies, indexes and assets. In turn, these higher dollar exchange rates crash these stocks, indexes, and cryptos.
The FED likely will increase these interest rates again. Chairman of the US Federal Reserve, Jerome Powell, has even mentioned this several times.
If these interest rates increase again, it may cause an even more devastating hit to the price of bitcoin, driving it below the major $18,000 support and proving the bitcoin bears right.
Disclaimer: The author's comments and recommendations are solely for educational and informative purposes. They do not represent any financial or investment advice. Always DYOR (do your own research)