If you are thinking of catching the falling bitcoin knife, here are 3 reasons to consider waiting

Bitcoin BTC / USD has had a strong downward trend in recent months. It is currently trading at $ 19,791, down from its all-time high of over $ 68,000. Prior to the latest Bitcoin crash, the cryptocurrency fluctuated between $ 28,000 and $ 32,000 for numerous months. The Bitcoin Fear and Greed Index is currently at 19, denoting extreme fear in the market.

Investors might consider buying Bitcoin right now due to its historical price movement rallies before its halving. Furthermore, recent support from government bodies, looking at cryptocurrency regulation, is bullish for Bitcoin in the long run. The Responsible Financial Innovation Act proposed on June 7, backed by bipartisan, represents the government’s support for regulating cryptocurrencies. Furthermore, the extreme fear present in the market classically indicates a good buying opportunity for Bitcoin. Therefore, with a long-term horizon, current levels can present an attractive purchase price for investors.

However, there are numerous bearish factors that perpetuate the downward trend experienced in Bitcoin’s price movement. Here are three to consider:

There is a large-scale illiquidity experienced by crypto companies globally. Three Arrows Capital (3AC), a large cryptocurrency borrower and lender, has suffered major insolvency following the recent market crash. The company has stored thousands of Ethereum ETH / USD token, causing its illiquidity to prevent investors from withdrawing their funds globally.

Other companies, such as the Centigrade CEL / USD network, they also had to face illiquidity, causing investor funds to freeze. Therefore, the potential bankruptcy of these companies and the liquidity crises faced around the world are a bearish sign for Bitcoin in the short term.

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Second, the global macroeconomic climate is uncertain, with fears of an impending global recession. The Federal Reserve, on June 15, said it would raise interest rates by 75 basis points, indicating a quantitative tightening (QT).

With excessive paper money being printed following the COVID-19 pandemic, inflation rates were steadily rising. Therefore, to preserve the economy, undertaking a quantitative tightening could be an extremely bearish signal for Bitcoin.

Third, the nature of Bitcoin is a risk asset. Risk assets during recessive market conditions experience much greater price volatility than risk-averse assets. Therefore, if global markets go into recession, large-scale capital could drain further out of speculative asset classes, such as cryptocurrencies. This could imply a further drop in Bitcoin prices.

Therefore, as market conditions remain turbulent and unclear, Bitcoin’s short-term price action looks bearish. However, as markets start to recover and investor confidence is slowly restored, Bitcoin, as the largest cryptocurrency, is likely to emerge from its bear market hibernation and resume its climb into global markets.

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