January 2022 has been a tepid one for many top cryptocurrencies including bitcoin, Ethereum, BNB (Binance), XRP (Ripple) and many other coins are finding it difficult to stay stable or even move up as many investors would expect of the first month in the year.
Since 2020 and 2021, prices of cryptocurrencies have moved up in January. This has not been the case for 2022 where the bitcoin market for instance has remained in a docile state, trading down 35 percent from the all-time high set in November 2021.
Ether, the second-largest crypto by market cap, also dropped and started rising. The coin was trading at $3,110 representing a decline of 1.74 percent pver the past 24 hours and 4.33 percent in the past week. Binance coin BNB has also declined from $530 on 3 January to $461 on 19 January.
The price of bitcoin as of the time of writing this article on Wednesday was $42,224 which represents a 0.31 percent increase in 24 hours and 3.71 percent in the past week.
Morgan Stanley, in its latest report says the bitcoin market is weakening due to tighter scrutiny from US financial regulators. The price of bitcoin dropped in value in the first week of January from $47,000 to $42,000 per digital coin following a December meeting of the US Federal Reserve, which suggested it may raise interest rates.
According to the minutes of the meeting, “Participants generally noted that, given their individual outlooks for the economy, the labor market, and inflation, it may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated. Some participants also noted that it could be appropriate to begin to reduce the size of the Federal Reserve’s balance sheet relatively soon after beginning to raise the federal funds rate.”
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The US Fed has about $8.8 trillion on its balance sheet, much of it accumulated during the coronavirus pandemic to keep financial markets stable and hold down long-term interest rates.
Experts say rising interest rates could have led to a knock-on effect of traditional investors who hold bitcoin, as they pursue less risky assets instead.
Alongside the interest rate, the cryptocurrency market is also reeling from political events in Kazakhstan have also raised concerns about the network’s capacity. A huge amount – about 18 percent – of the world’s bitcoin mining activities takes place in Kazakhstan.
Many of the miners who fled China in 2021 following a crackdown on crypto mining and activities found their way to Kazakhstan. A week of protest over fuel hikes, led the government of the country to take drastic decisions to stop the crisis from escalating.
President Kassym-Jomart Tokayev not only sacked his government and asked for military help from Russia, but he also ordered a national internet shutdown. The shutdown took an estimated 18 percent of the world’s bitcoin mining activities offline. Although internet service was restored temporarily, data from Netblocks Internet Observatory found that the country’s connectivity levels remain at a flatline of just 5 percent.
Increased regulators’ oversight on the crypto market also continues in the United Kingdom. The government announced plans to impose new rules on cryptocurrency ads to ensure they are fair, clear, and not misleading consumers. The Financial Conduct Authority (FCA) is expected to enforce the new rules.
