Can Traders Expect Another Major Crypto Crash in Q4-2022

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After the news spread that the United States Federal Reserve might increase interest rates by an additional 75 basis points to combat inflation, the prices of the two leading cryptocurrencies on the market, Bitcoin and Ethereum, fell on Wednesday.

The Fed announced a further increase of 0.75% in July. Within an hour of the announcement, both bitcoin and ethereum increased in price. This is not normal market behavior as rising interest rates make investors more likely to sell their riskier assets as borrowing becomes more expensive.

Market-Wide-Recessions are Back 

To overcome the economy’s spiraling inflation, the Federal Reserve has adopted a remarkably tough attitude. They are also reducing their budgets quantitatively to unload their bloated bank sheets from the pandemic. Three times in a row, the Fed has raised interest rates by 75 basis points. Even market bulls anticipate a 100 bps increase by the end of the year.

Meanwhile, the warning of recession is being repeated in the market. According to the World Bank, the world economy will experience a recession in 2019. FedEx issued a dire warning that the fall in demand has intensified. The economy will indeed enter a recession if Fed Chair Jerome Powell follows in the footsteps of his predecessor, Paul Volcker.

Put option purchases by retail traders set a record for spending. An investor who purchases a put option has the option but not the obligation to sell a certain asset. It is regarded as having a depressing effect on the underlying asset’s value. Additionally, traders have net shorted index futures for a record high of $46 billion.

Although not everyone agrees with them. A small squeeze is on the horizon, according to renowned cryptocurrency analyst and CEO of Eight Global, Michael van de Pope. When a short stock rises and prompts short sellers to liquidate their position at a loss, this situation is known as a short squeeze. Poppy predicts an imminent cryptocurrency rally.

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