The cryptocurrency market is down today, following a big decline in the risky asset class after Jerome Powell, the Chairman of the US Federal Reserve, made alarming comments regarding interest rates and high inflation. 

The price of bitcoin is presently trading below $22,000, which is a worrying level for traders who think a decline below such a level would result in a trend reversal down to $19,000. Ether, which is presently trading at $1,555 and has a crucial support level of $1,450, is also causing similar concerns. 

37,374 investors were liquidated on the last day, totalling $87.6 million in liquidations. The greatest single liquidation order occurred on OKX, with a value of $923.27K for ETH-USDT-SWAP. 

What you should know: The cryptocurrency market is not immune to volatility. Often, substantial price changes are observed before the release of important economic data releases and the Federal Reserve’s statement on monetary policy and interest rate hikes. 

In addition, the Mt. Gox scandal, which will result in the release of 142,000 BTC this year, also affects market sentiment. The Ethereum Shanghai upgrade, which has been postponed until early April, is another significant bias. As a result, there will be increased sell pressure because Validators can now withdraw staked ETH from the Beacon Chain. Investors predict that the market will incorporate the impact through a pre-selloff, noting that it is “probable” that the market will do so. 

Also, Silvergate Bank, one of the two major banks serving the crypto industry, is having issues (the other being Signature Bank). Recently, Silvergate Bank reported a $1 billion loss for the fourth quarter of 2022 and disclosed a DOJ regulatory investigation. 

The current SEC crackdown on centralized staking, along with subsequent enforcement actions against Paxos and Binance, have also impeded the emergence of long-term bullish momentum across the market. While some decentralized staking systems might profit from the latest enforcement action, the regulatory climate for cryptocurrencies is still unclear, and market volatility is frequently caused by uncertainty. 

In case you missed it: Some weeks back, the United States SEC began the most current wave of regulatory actions by targeting Kraken earn program. The SEC charged Kraken with “failing to register the offer and sale of their crypto-asset staking-as-a-service platform,” which the agency alleges qualified as a sale of securities, according to the $30 million settlement release. Kraken also consented to stop running the Earn program in addition to paying the penalties. 

In response to the enforcement action, Nexo also decided to discontinue its centralized staking program. While others claim that the staking prohibition is yet another blow to cryptocurrencies, Brian Armstrong, CEO of Coinbase, has promised to challenge the decision in court. Although not every SEC commissioner supported the enforcement action against Kraken, the organization announced fresh crackdowns because of this choice. 

Some crypto investors predict further sell-offs, while Bitcoin analysts continue to issue cautionary statements about the continuation of the long-term decline. Below bitcoin’s $20,000, there is a CME future “gap,” and some traders predict that the price of the flagship crypto will retrace to this level at some point in the future.

Investors’ appetite for risk is likely to stay low in the interim, so prospective cryptocurrency traders may want to hold off until there are indications that US inflation has peaked or until the Fed indicates that smaller-scale interest rate increases are on the horizon. A more open regulatory roadmap for the cryptocurrency business would also help to boost confidence in the area.