In recent days, the cryptocurrency market has been rocking and leaving many people with their hair on end. Bitcoin (BTC), the most famous cryptocurrency, has plummeted from over 100,000 to almost 95,000, and has taken other major currencies like Ethereum (ETH), Ripple (XRP) and Solana (SOL) with it. But what's going on, after all? Let's break it all down in an easy-to-understand way.
What happened?
The drop was driven by a mix of global economic factors and investor fear. It wasn’t just the crypto world that felt the blow, traditional markets were also shaken:
- The Nasdaq 100 fell ~1%.
- The S&P 500 fell ~0.5%.
- Shares of giants like NVIDIA and Tesla also plummeted, dragging the market down.
This movement was fueled mainly by the rise in US Treasury yields. Sounds complicated? Don't worry, I'll explain.
US Bond Yields: Why Does It Matter?
Treasury bonds are super-safe investments that compete directly with riskier assets like cryptocurrencies and stocks. When yields on these bonds rise, many investors prefer to move to something less risky, taking money out of volatile markets like crypto.
In recent days, 10-year yields have risen to 4.70%, and 30-year yields have reached 4.61%. This has created a cascading effect, putting pressure on both the financial and cryptocurrency markets.
The Role of the Federal Reserve
Another key factor is the Federal Reserve, which has recently indicated a tougher stance on interest rates. In essence, fewer rate cuts are expected in 2025, which is putting additional pressure on the market.
Additionally, a Labor Department report showed that U.S. job openings hit a six-month high, raising inflation fears and making investors more cautious.
How does this impact the cryptocurrency market?
Cryptocurrencies like Bitcoin are often seen as risky assets. So in times of uncertainty, it’s common for money to “flee” to safer investments. For example:
- BTC's RSI (Relative Strength Index) has dropped, indicating that it is close to an oversold zone. In other words, the price may be too cheap, which could attract new buyers.
What to do now?
Before you do anything, take a deep breath. Downturns can also bring opportunities, but it is essential to act cautiously. Here are some practical strategies:
1. For those who want to buy low (and sell high):
- Monitor RSI and other technical indicators. If BTC continues in the oversold zone, it could be a good entry opportunity.
- Keep an eye on the moving averages (EMA 7, EMA 25 and EMA 99), which help identify short and medium term trends.
- Set clear Take Profit and Stop Loss levels to avoid large losses.
2. For those who prefer long term:
- Consider the Dollar Cost Averaging (DCA) method: buy small quantities regularly, regardless of price. This reduces the impact of volatility.
- Be patient. Remember that cryptocurrencies are extremely volatile, but Bitcoin's history shows that it tends to recover in the long term.
3. Information is power:
- Follow news that could impact the market, such as Federal Reserve decisions, employment data and global events.
- Use reliable charts and analytics to make decisions based on data, not emotion.
Conclusion: a market in transition
The recent drop in the cryptocurrency market is a reminder of how sensitive it is to external factors like interest rates and economic data. But if you’re well-informed and have a clear strategy, you can turn volatility into opportunity.
The market is oscillating, and we still don't know if Bitcoin will recover quickly or fall a little more. The important thing is to always act cautiously and think about the long term. After all, as they say in the crypto world: “those who have patience reap the best rewards”.
Stay tuned and good luck on this journey! 🚀