#BTC #ratehikes #taxes #deathcross #history
The crypto market has been on a strong recovery since the start of 2023, with many major cryptocurrencies increasing by 50% to 100%. Bitcoin also recently broke $25k for the first time since June 2022, but this rally could be short-lived. Here are four factors that could cause the crypto market to drop further in March.
1. FED Aggressive Rate Hike
The Federal Reserve has been raising interest rates to combat inflation, which has been rising faster than expected. The Consumer Price Index (CPI) and the Personal Consumption Expenditures (PCE) index, which are both measures of inflation, came in higher than expected in January1. This means that the FED will likely continue its aggressive rate hike policy, which could have a negative impact on the crypto market. Historically, higher interest rates have caused asset prices to drop, as investors shift their money to safer and more profitable investments.
2. Historic Performance
Another factor that could weigh on the crypto market is its historic performance in March. According to historical data, March has been a bad month for Bitcoin, with an average return of -5.3%2. This could be due to seasonal factors, such as tax season or market cycles. If Bitcoin follows its historical trend, it could drop below $20k in March.
3. Tax Season
Speaking of tax season, this is another event that investors don’t like. Generally, prices drop before tax reporting as investors sell their profitable assets to pay their taxes or offset their losses3. Given that cryptocurrency has had a strong rally since the beginning of the year, a sell-off is very likely in the coming weeks. This could create downward pressure on the crypto market and trigger a correction.
4. Death Cross
Finally, one of the most ominous signs for the crypto market is the death cross. The death cross is a chart pattern formed when the 50-day moving average crosses below the 200-day moving average4. This indicates a long-term downward trend and a loss of momentum for an asset. Bitcoin recently had its first-ever death cross on its weekly time frame, which is considered by many traders and analysts to be a bearish signal. In the past, death crosses have caused assets to drop by 40% to 50%. If this happens to Bitcoin , it can go below $12k.
How To Protect Your Portfolio?
The best way to protect your portfolio from these factors is by diversifying your investments and using risk management strategies such as stop-loss orders or hedging instruments. You can also take advantage of opportunities in other markets or sectors that are less affected by these factors or even benefit from them.
Disclaimer: This article is not intended as financial advice and should not be taken as such.
