Bitcoin’s price has tumbled amid fears following a hack of Bybit exchange. Analysts caution on potential further declines, with stagflation concerns growing in the U.S. economy. The Crypto Fear & Greed Index has plunged, reflecting market anxiety, as investors await potential regulatory changes and inflation measures from the Federal Reserve.

Bitcoin and other cryptocurrencies are experiencing turmoil following a significant hack at the Dubai-based Bybit exchange, sparking concerns over potential “suppression” of bitcoin prices. Despite a temporary drop following the incident, there are indications of recovery as Senator Cynthia Lummis, a notable supporter of bitcoin, prepares to propose significant legislation that may impact the market positively.

Among recent developments, economic fears have escalated, particularly regarding the likelihood of stagflation, defined by the Bank of America as low growth accompanied by high inflation. Jack McIntyre of Brandywine Global indicated that this situation could hinder consumer demand, heightening the overall economic threat facing the markets. Tim Urbanowicz from Innovator Capital Management echoed these sentiments, emphasizing stagflation’s return as a key concern.

Recently, bitcoin prices fell below the $90,000 mark, their lowest level since the surge post-Donald Trump’s election victory. The Crypto Fear & Greed Index has also registered in the “extreme fear” zone, coinciding with substantial declines in Ethereum, Solana, and Ripple’s XRP. The crypto market analysts are actively assessing the implications of this downturn on broader market trends.

Geoff Kendrick, head of crypto research at Standard Chartered Bank, noted that bitcoin is entangled in the recent selloff fueled by market volatility. He forecasts that bitcoin may dip further to approximately $80,000 amidst a potential $1 billion outflow from bitcoin spot exchange-traded funds (ETFs). Kendrick advises traders to refrain from investing until conditions improve significantly.

The Federal Reserve recently began a cycle of interest rate cuts but has since moderated its stance due to resurfacing inflation concerns, now recognizing a 97.5% probability of unchanged rates at the next meeting. Dan Coatsworth from AJ Bell suggested that rate cuts might not resume until late 2025, further complicating the economic landscape.

Furthermore, the Fed’s preferred inflation indicator, the personal consumption expenditures (PCE) price index, is anticipated to reveal inflation surpassing the 2% target. There are also discussions surrounding a potential interest rate hike within the year, adding to investor speculation and uncertainty. James Toledano from Unity Wallet highlighted that investors are in a “wait-and-see” stance, balancing optimism around institutional inflows with broader economic risks.

Notably, analysts assert that a major price crash appears improbable in the short term unless an unexpected macroeconomic or geopolitical event occurs. Most market players are optimistic about favorable regulatory advancements in the cryptocurrency sector, particularly in the United States. However, bitcoin’s sustained performance below $100,000 raises concerns about imminent market fluctuations.

Alex Kuptsikevich, FxPro chief market analyst, expressed that bitcoin’s nagging stability could lead to significant price movements soon. The current market dynamics demonstrate a tendency toward lower valuations, characterized by prolonged sideways movements. As the market consolidates, analysts predict a potential “compressed spring effect,” leading to a sharp price movement either upwards or downwards in the near future.

In summary, the bitcoin and cryptocurrency markets are under significant pressure due to hacking incidents and economic uncertainties surrounding stagflation. Despite the recent price drop, positive legislative developments and investor optimism linger. Analysts anticipate a volatile market, cautioning against buying into current dips until stabilization occurs. The focus remains on regulatory changes, interest rate decisions, and macroeconomic trends as key determinants of future price movements.

Original Source: www.forbes.com

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