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Crypto Week: Institutional Investors are not for the Rescue

Bitcoin prices dropped below $18,000, the lowest since 2018. Low liquidity over the weekend and the absence of options to deposit money into trading accounts make the market very vulnerable. So, when BTCC ETF decided to cut its balance by 24,500 BTC, prices immediately dropped. The more prices go down the more investors lose money on open trades, and thus the desire to close trades becomes stronger. The market has witnessed the financial troubles of several crypto projects like Celsius, 3AC, and others. And this is likely not the end of the bumpy, downhill road, as forced coin sell-offs will only contribute to the slide.

The pressure seriously mounting as the turbulent global economy together with monetary tightening has revealed the fragility of the crypto market. Falling liquidity and the declining appetite for risks has not only hit stocks but also the crypto market despite all the talks about the new alternative monetary system that could be established with cryptos. The most painful reality is that institutional investors that joined the bullish market are not there to make long-term passive investments. As soon as the Federal Reserve (Fed) started to draw out liquidity, hedge funds immediately went short, withdrawing money from the market without any attempts to support it at the seemingly new dips.

Cryptoenthusiasts cannot be considered as true investors as they turned out to be a bunch of people who were lucky enough to buy low and sell high in the bullish market. Investments that were making profit were rather chaotic and that was appropriate for the booming market. Any debates over digital gold, strong resistance levels, or 200-days moving averages that were depicting the position of the market then are seen rather inadequate now. The only cycle that is truly important is the monetary cycle of the Fed that may reverse the market in one click.

The most convincing proof that the crypto party is over is the withdrawal of fiat money from Tether accounts that leads to USDT burning. At the beginning of May the USDT market cap topped $83 billion, while later in June it dropped to $67 billion. However, it would be wrong to put the blame only on this for  the drop as the ultimate reason for the market decay is clearly defined in the documentation of the Tether protocol. So, it should not be a surprise for anyone.

Without any positive developments on risky assets that could be tracked by the Nasdaq index, the crypto market  cannot deliver any positive dynamics. Digital assets will only start to rally when investors are ready to start a super risky gamble, just like in 2020 when the Fed pumped liquidity into financial markets. We may see a slight rebound of BTC prices after a 12th consecutive downside week. However, it is unlikely that it may return above $22,000. If prices do not reach this level then they will fall even deteriorate further.