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Why has the cryptocurrency market declined recently?

The cryptocurrency market saw a sharp decline this week. After the price rebound following the launch of spot Bitcoin ETFs last January, the market once again took a downward trend this week. Why this breakdown?

Cryptocurrency market prices drop this week

decreases Market capitalization of cryptocurrencies From $2.84 trillion on March 14 to around $2.63 trillion at the time of writing. This drop is due to the rebound in the price of Bitcoin. The value of Bitcoin fell from $73,000 to $66,000.

BitGate exchange chief analyst Ryan Lee explains to BeInCrypto Arabia the decline that the digital currency market has witnessed in the recent period with two fundamental factors. The first is the negative impact of macroeconomic indicators in the United States of America.

“On April 1, the U.S. ISM manufacturing index returned above the boom-bust level of 50 points after a year and a half.”

👈Read more: Digital currencies and the US Federal Reserve: what is the relationship between them?

Mr Lee believes that the possibility that the US Federal Reserve will cut interest rates next June has contributed to the rise in the US dollar index. Thus identifying the short-term downward trend in the cryptocurrency sector:

" The US economy remains strong and the likelihood that the US Federal Reserve will cut interest rates in June has decreased significantly. This data indirectly led to a rise in the US dollar index to level 105. The yield on 10-year US Treasury bonds increased by 11.7 basis points. The rise in the US dollar index and rising interest rates on government bonds do not favor the short-term trend in the cryptocurrency market."

As the US Dollar Index Improves, the Cryptocurrency Market Declines

So, for Mr. Lee, as he is also known in the modern financial sector, every time the US dollar index improves, it leads to a decline in the cryptocurrency market.

As for the second factor, it is linked to the launch of a huge new project. Mr. Lee believes that the launch of the Wormhole project on the secondary market and the airdrop that will precede it, where approximately US$900 million in W tokens will be distributed, has contributed to the decline of the cryptocurrency market.

This is due to the fallout from the launch of the massive Wormhole Project. User selling of USDT and USDC stablecoins has created downward pressure on stablecoins. Hence the broader crypto market.

"Wormhole was recently launched in the secondary market. According to the pre-market price of around 1.5 USD (...) After the launch, users sold it for USDT and USDC, which led to an increase short-term demand for stablecoins." Underlying assets denominated in stablecoins are under downward pressure. "

What will happen now?

As for what happens next, Mr. Lee predicts that the cryptocurrency market will bounce back from a short-term shock. “And if traditional money continues to flow, we can pay attention to the opportunity for future underlying assets to reach new highs.”

👈Read more: How to buy Solana with a bank card?

Finally, as has been evident throughout the last week, Solana has broken out and reached new highs, while the entire market is turning red. Thus, Mr. Lee believes that the performance Solana (SOL) It could continue to shine better than the rest of the currencies on the market. Especially since Wormall's distribution first reached Solana's public network, SOL's performance could be better than the market.

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