By Lee Min-hyung
Cryptocurrencies are feared to remain in the doldrums even after the end of this year amid the U.S. Federal Reserve's gestures to remain hawkish and for longer than expected.
The price of Bitcoin has been trapped in a band of around $20,000 during the past three months without showing any particular signs of a rebound. But earlier hopes were that the crypto winter would not last long, as the Fed and global central banks were forecast to end monetary tightening soon.
But the timeline is expected to be delayed further after the Fed conducted its third straight giant step of increasing the key rate by 75 basis points this month again.
Other indicators ― such as the dollar and stock indices ― also clearly show investors' preference for safer assets are solidifying further. The Korean currency closed Thursday at 1,431.3 won per dollar, which was the weakest level seen in more than 13 years. The main bourse also tumbled to around 2,200-point mark on escalating skepticism over near-term rebound of risky assets.
Ethereum prices are also hovering below $2,000 after hitting a new high of more than $4,700 in November last year. Given Bitcoin and Ethereum are two key indicators determining the price movements of other minor cryptocurrencies, the crypto market sentiment will likely keep freezing on the prolonged weak performance of the top cryptocurrencies.
|Bitcoin's price chart / Screen capture from CoinMarketCap|
Market analysts said the crypto winter will not be over until central banks across the globe display a willingness to slow down the pace of monetary tightening.
"No one is surprised Bitcoin is lower," Edward Moya, senior market analyst at the OANDA, said. "Risky assets are getting hit hard as a wrath of global central bank tightening is leading many to think hard economic times are upon us."
"On a day when stocks are down over 2 percent, you would expect Bitcoin to be down double or triple that and not just around 3 percent weaker, which could mean many long-term holders remain unfazed," he said.
According to data from the Korea Financial Intelligence Unit, the market capitalization of cryptocurrencies traded in Korea reached 23 trillion won at the end of June 2022, a drop of 58 percent from the end of 2021 when the figure came in at 55.2 trillion won.
Data also showed that daily crypto transaction here was also cut in half. The figure dropped to 5.3 trillion won in the first half of this year after soaring to 11.3 trillion won during the second half of 2021.
This resulted in drastic earnings fall of local crypto exchanges. A survey conducted by the authority showed that a group of 35 crypto business operators reported a combined operating profit of 630.1 billion won between January and June this year. This is a drop of 62 percent from the six months earlier.