Bitcoin returns to $23,000, Ethereum avoids correction, but it may just be a bull trap
Bitcoin rally is a worrying signal, Ethereum and altcoins are also in danger
The U.S. has officially entered a recession as the recently declining GDP data turned negative for the second straight quarter, which technically means the country is officially in a sharp economic downturn. But despite the confirmation of the crisis, cryptocurrencies and financial markets remain unmoved.
A worrying sign for Bitcoin’s rally
Bitcoin’s reaction to the official recession confirmation and another big rate hike is odd considering we saw the initial move in the asset in the market after the first rate hike. At the time, the cryptocurrency market entered a strong downtrend, leading to a 40% retracement and the prolonged consolidation we are seeing today.
A quick rise to $23,000 can be a hugely misleading indicator for beginner investors who see price increases in a poor macro environment as the end of a bear market and a return to “normal conditions.”
Unfortunately, trading volume, market inflows and other fundamental metrics that track the behavior of large investors that are actually shaping the cryptocurrency market are still showing signs of a bear market.
Most institutional investors remain far from investing in digital assets, providing only negligible inflows into the market.
For example, Cathie Wood’s Ark Investments recently trimmed Coinbase stock, meaning that despite the short-term recovery we’re seeing today, the world’s largest fund is still looking for a way to shed exposure to the cryptocurrency market.
Ethereum and altcoins are also in danger
Ethereum was also one of the coins that managed to get back above the $1,600 threshold, initially seemingly unable to break through. But the unexpected behavior of Bitcoin investors has allowed Ether to easily reach old local highs.
Unfortunately, the upcoming merger update will not be enough to keep Ethereum afloat as industry-related risks are still pushing investors away from the market, as mentioned above.
At press time, Ethereum was trading at $1,622, down about 1% over the past 24 hours.