The tsunami rocking the global cryptocurrency market seems not to soft-pedal anytime soon. The constant crypto crashes this year alone have plummeted the prices of most cryptocurrencies, including that of Bitcoin (BTC), Ethereum (ETH), and Tether. Since 2022, crypto investors have not had any better, as most of them have lost their hard-earned money, resulting in massive sale of assets to recoup whatever is left from the tsunami.
Bitcoin, with an all-time high of $65,000 as of November 2021 trades for between $20,000 and $25,000 for the most part of this year. Early September, the most popular token stormed out of that range. According to experts, one of the major reasons for the massive fall of Bitcoin, and indeed, other financial assets is the aggressive monetary policy championed by the US Federal Reserve.
The US Federal Reserve monetary policy is aimed at taming inflation, which is responsible for the skyrocketing prices of goods and services. Inflation has made so many investors dump their interest in bonds, stocks, and even cryptocurrencies. Investors are now on the lookout for inflation-immune financial instruments like Treasury bills, gold, and other assets that serve as a hedge against inflation.
The massive sale of crypto assets have led to a condition in the market known as capitulation. In this article, we will take a look at what cryptocurrency capitulation means and what the future of the cryptocurrency market looks like. First let’s define what Bitcoin is and the benefits it boasts of.
What is Bitcoin?
Bitcoin is a digital currency that was launched in 2009 by an anonymous person/group known as Satoshi Nakamoto. At its core, Bitcoin uses a network of computers to effect transactions. All transactions involving the use of Bitcoin are recorded on a ledger, which we today call “the blockchain.
The greatest benefit of using Bitcoin is for the payment of goods and services online. If you visit an e-commerce storefront that accepts Bitcoin, after purchasing the products that the brand offers, you can reach out to your digital wallet to pay for the goods with your Bitcoin. In other words, with Bitcoin, you don’t need to go around town with bundles of paper money in your wallet or pocket.
Additionally, payments involving the use of Bitcoin do not have any third-party interference. This is unlike the use of traditional financial institutions where you need different levels of approvals before funds can be moved from one account to the other. Now, let’s explain what capitulation means for Bitcoin investors.
What is capitulation?
In its simplest definition, capitulation refers to a period in the crypto market where there is a dramatic increase in the selling pressure of cryptocurrency assets by investors who are losing their hard-earned money.
Capitulation suggests that there is a massive sell off of tokens by the bulls. The losses that cryptocurrency investors have sustained this year alone is so daunting. For example, Bitcoin alone has lost more than 60% of its value since the start of this year.
Since mid-July, Bitcoin has hovered around $20,000. Experts believe that the token may fall in price to around $17,500 before it finally capitulates. However, if the US Federal Reserve is able to tame inflation as they promised and also inject enough liquidity into the economy, the prices of cryptocurrencies are likely to attempt recovery so that investors can at least recoup their investing capital.
A “massive capitulation” on the horizon
Cryptocurrency enthusiasts are of the opinion that crypto assets should not be correlated with other financial instruments, particularly the stock market, but should be traded like every other commodity like gold and silver.
However, experts argue that what we have seen in recent times is that cryptocurrency has synergized with the traditional stock market. Although, the recent performance of Bitcoin has changed that narrative. Bitcoin has helped to avoid massive selloffs that the global stock experienced recently.
According to Naeem Aslam, a crypto analyst at Avetrade, Bitcoin capitulation is on the horizon. The recent performance suggests that the token will cause a massive capitulation in the coming weeks. Aslam buttresses his points by asserting that the extended length of time that Bitcoin has been in the $20,000-$25,000 range is enough to conclude that Bitcoin, a token with the largest market cap, will soon capitulate.
Despite the continuous rise of the United States Dollars (USD) against other global currencies, Aslam feels that investors who are still bullish in BTC may not sell their assets in a bid to rally the price of the asset. He cautioned that the US Federal Reserve may take steps to woo crypto investors out of the market.
Investors that will be enticed by the US Federal Reserve policy to sell off their assets could gain massively, while those who still held on to their BTC portfolio will receive a bitter battering. According to Aslam, during selloffs, the price point of BTC would further plummet to the $12,000 mark. Experts suggest to the investors still purchase tokens that are insignificant in prices, while looking out signs to pull out from the market.
There you have it! Capitulation in cryptocurrency is a period where there is a dramatic increase in the selling pressure of cryptocurrency assets by investors who are losing their hard-earned money. Capitulation suggests that there is a massive sell off of tokens by the bulls. We believe this article has been able to explain what capitulation means for investors and the steps they can take to secure their cryptocurrency portfolio.
Experts suggest that despite capitulation, new investors can still invest in the present-day global crypto market. There are some promising tokens you can include in your investment portfolio and they will yield massive returns on your investments. So, look out for such cryptocurrencies and do the needful. Also, ensure you do your due diligence before investing in a token to avoid burning your fingers in the current bear market.