The once-booming cryptocurrency market seems to be entering a period of far more volatility than usual. Major cryptocurrencies like $BTC and $ETH have dropped in price (12% and 11% month to date, respectively) despite the recent Bitcoin halving, which historically had a positive effect on the market.
This decline coincides with a broader market correction, as investors remain cautious about high inflation and a potential recession.
Fed Balances Inflation Concerns With Economic Growth
The possibility of a disconnect between the stock market and the overall economy was the key topic of the latest Federal Open Market Committee (FOMC) meeting.
The Central Bank Chief pointed out that while stock markets started to recover, there’s a chance we might be entering a period of stagflation. In this scenario, high inflation persists alongside economic stagnation.
Fed Chair Jerome Powell warned that inflation in the US is still too high, and bringing it down might take longer than expected.
As stock market investors express concerns about the potential interest rate rise, typical during high inflation periods, the Fed takes a reassuring ‘pro-economy’ stance.
Investment Strategy Head Scott Helfstein promised to hold the rates steady, highlighting that the Fed is focused on keeping the economy strong even if that means inflation isn’t falling as fast as desired.
Economic Gloom Casts Shadow Over Crypto Market
Given the uncertain economic outlook, investors appear to be cautious about riskier assets like crypto.
And although some investors might see crypto as a hedge against inflation, its effectiveness in that role is questionable.
$BTC has tumbled below $60K, its lowest since late February, despite recent analyst predictions of it hitting $70K post-halving. $SOL dropped by 9.22% within a week, now trading at $133, and $DOGE by 14.55%, now at $0.1282.
In addition to the global economic downturn, former Binance CEO Changpeng ‘CZ’ Zhao was sentenced to four months in prison for violating the Bank Secrecy Act in November 2023.
Cases like this tend to undermine investor confidence in the crypto market, leading to an overall price plunge.
Another factor in this crash could be Powell’s confirmation in the 2023 FOMC meeting that stablecoin legislation is close to being implemented, along with a recommendation to Congress for CBDC development.
Many crypto adepts may see strict regulations as a move away from the decentralized philosophy, halting investments until the dust settles.
High-Risk, High-Reward – The Allure of Token Presales During a Crypto Crash
While established cryptos are experiencing a downward turn, we notice a surprising trend: token presales seem to be defying the bearish sentiment.
So, the first multichain meme coin Dogeverse ($DOGEVERSE) raised $10M in just two weeks. Sealana ($SEAL) showed an equally significant investor sentiment, hitting $130K in the first 24 hours of the presale.
This surge in investor interest in seemingly riskier coins may be down to hope for a quick flip in a volatile market. With established coins dropping, some investors might look for short-term gains by buying into presales at a discount.
Closing Thoughts
The crypto market is in a precarious position, yet it’s not all gloom and doom. Although the coming months are likely to be marked by continued volatility, some new projects show there’s still hope for the industry’s revival.
As always, we want to remind you that cryptocurrencies are a high-risk investment. In these uncertain times, the importance of doing your due diligence doubles.
Never invest more than you’re prepared to lose, and follow industry news to stay up to date on the latest developments and regulations that could affect crypto prices.
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