The cryptocurrency markets have risen 22% over the past seven days, with a total market capitalization of $ 200 billion. The surge took the figure to $ 1.100 trillion, the highest in five weeks.
However, the markets are still far from bull territory and remain down 64% from the peak of more than $ 3.000 trillion reached in November 2021.
The momentum could be reversed very quickly as several macroeconomic factors will come into play this month. Similar factors have been responsible for the massive market crashes that hit stocks and cryptocurrencies this year.
The recession in the United States looms
The US Bureau of Economic Analysis (BEA) will release its advance estimate of second quarter GDP (gross domestic product) growth on July 28.
GDP measures the market value of all final goods and services produced in a given period by a country.
This is significant because two consecutive quarters of negative GDP mean that the country could be in a technical recession. The US figure for the 1st quarter was -1,6%.
On July 19, the Atlanta Fed revised its GDP forecasts, bringing them to -1,6%, like those of the 1st quarter. Cryptocurrency critic Peter Schiff noted that most of 2022 has already been in recession:
The Atlanta Fed again lowered its second quarter #PIL forecast. It now stands at -1,6%, matching the 1st quarter reading. It is amazing how so many analyzes have not yet predicted a #recession in their economic forecasts for 2022 or even 2023, when the economy is likely to have spent all of 2022 in recession. - Peter Schiff.
A recession would be bad news for high-risk assets like cryptocurrencies and tech stocks. Therefore, the bad news next week could actually turn off the current market sentiment and put an end to the cryptocurrency market rally.
Additionally, the Federal Reserve is expected to raise rates again by 75 basis points next week. Rising interest rates are bad news for cryptocurrencies too, as it increases the cost of borrowing and encourages savings. This makes traditional bank accounts slightly more attractive and much safer than volatile crypto for the average retail investor.
The bear market
These two factors alone could see bears return in strength, pushing cryptocurrency prices to the bottom of a new cycle.
Earlier this week, on-chain analytics provider Glassnode reported that current market conditions have all signs of hitting bottom ... aside from duration.
Using the Bitcoin realized price metric (quotation BTC), calculated the average time the asset spent below this value in previous bear markets and compared it to the current one. The realized price of Bitcoin is the value of all BTC in circulation at the price of the last move, which is an approximation of how much the entire market has paid for its coins.
The average time spent below the realized price in a bear market is 197 days; this cycle only saw 35 days below that level. At press time, Bitcoin was trading just above the realizable price of $ 21.934, at $ 23.363. If history rhymes and the macroeconomic storm deepens, there may still be much to suffer.
