Recently, the Bitcoin and altcoin markets have experienced significant declines. What factors are at play behind this? Let's investigate.
1. Google quantum computing makes new progress: Google's quantum chip Willow has achieved breakthroughs in computing power. Once quantum computing is applied to Bitcoin mining, the decentralized foundation of Bitcoin will be shaken, miners will face more intense competition, and the market will be increasingly worried about Bitcoin's prospects.
2. Microsoft abandons Bitcoin investment: Microsoft's board rejected a proposal to invest 1% of its assets in Bitcoin. This move has made the market more cautious about large enterprises entering cryptocurrency investments, and investor confidence has been significantly impacted.
3. Strengthening dollar and tightening financial environment: Since September, long-term bond yields and mortgage rates have risen, the dollar has strengthened, and global money supply has continued to tighten. Under this macro environment, the risks for crypto assets led by Bitcoin have increased, as a strengthening dollar typically has a negative impact on cryptocurrencies.
4. Market sentiment dominates fund flows: When Bitcoin prices rise, institutions and market makers often use BTC/altcoin trading pairs to adjust fund allocation, diverting funds from altcoins back into Bitcoin, which puts selling pressure on altcoins.
5. Powell's tough stance: Federal Reserve Chairman Powell recently emphasized that the Fed will continue to raise interest rates, aiming to achieve a 2% inflation target within the next 1-2 years. This means that dollar interest rates will remain high, hindering the inflow of funds into the crypto market and further widening market declines.
6. Profit-taking triggers a wave of sell-offs: As prices of cryptocurrencies like Bitcoin rise, many investors and institutions choose to lock in profits by selling at high levels, creating tremendous selling pressure. This force has a strong short-term impact on the market, pushing prices down.
7. Bitcoin ETF triggers volatility: The emergence of Bitcoin ETFs has attracted more traditional investors, but it has also led to increased market volatility. The influx of funds into Bitcoin ETFs may pose risks of liquidity shortages, making the market increasingly sensitive to fluctuations in Bitcoin prices.
Overall, factors such as advancements in quantum computing, Microsoft's investment decisions, dollar appreciation, Powell's hawkish remarks, profit-taking sell-offs, and Bitcoin ETFs interweave to drive the market lower. Investors must remain vigilant and closely monitor global macroeconomic conditions and changes in the crypto market, making cautious investment decisions!