For many investors, the recent bull run in the cryptocurrency markets has not had the same impact as previous bull runs. For this reason, while many investors are expecting a new bull, others are at least hoping for a recovery and upturn in the markets. However, investors who expect that all the negative scenarios will disappear and Bitcoin and alternative cryptocurrencies will rise again can no longer just follow the cryptocurrency market. There are many global metrics to keep track of.
At the time of their emergence, cryptocurrencies were embraced as an alternative economy and an outlet in times of crisis. However, this perception has started to change over time. Bitcoin, which was expected to be free and independent, has been affected in parallel with the decisions coming from the US and has moved away from its role as “digital gold”. This calls into question the expected role of cryptocurrencies as a safe haven in times of crisis.
With the pandemic, the world has taken various steps to overcome a process it has never experienced before. This process brought along the inflation problem that has been going on for the last three years. The fight against inflation, led by the US, was carried out through various economic steps. However, since these steps have not yielded the expected results, experts feel the need to try new methods.
Although the interest rate hike and tightening policy in the US has reduced inflation to a certain extent, it continues to trigger a global economic crisis. This is also affecting the Asian stock markets and causing serious declines in all world markets. The FED's decisions are therefore subject to harsh criticism. Apart from the fight against inflation, the world is also dealing with geopolitical tensions. The Ukraine-Russia war and tensions in the Middle East are deeply affecting the fragile economy and reinforcing negative developments. These regional tensions bring concerns of World War III to the agenda. In this process, gold comes to the fore, while other financial instruments move negatively.
Wars, economic crises and the threat of pandemics that re-trigger them continue to challenge the global economy. After the world has recovered from the COVID-19 pandemic, the World Health Organization is warning of a new pandemic. This warning shows that markets need to constantly assess new threats and remain vigilant.
In this complex and negative environment, it is curious how cryptocurrencies, seen as an alternative economy and an escape mechanism from state repression, are performing. However, just like the changing world economy post-pandemic, the behavior and function of cryptocurrencies have changed. Cryptocurrencies, especially Bitcoin, are now acting in parallel with traditional financial instruments rather than as an alternative solution when such big issues are discussed.
For example, with the introduction of spot ETFs, Bitcoin is behaving similarly to traditional financial instruments in crisis situations. While gold rises during geopolitical tensions and threats of war, Bitcoin follows the declines in stock markets. It also moves in parallel with traditional financial dynamics by being affected by the economic policies and data of the US and other countries.
As a result, Bitcoin has recently been stuck between $58,000 and $64,000. Even if it breaks out of this range, it cannot experience any divergence or bounce by moving in and out of this region. Although it is possible to explain this situation as the effect of spot ETFs and traditional finance, the slowdown in value-added products and steps in the cryptocurrency market in recent years may also be one of the reasons for this congestion. This is supported by the weakening of the power needed for cryptocurrencies to differentiate, the lack of a pretext to stand out, and the developments that have brought cryptocurrencies closer to the instruments of traditional finance. We are no longer talking about an alternative, but a similarity.
