Here’s Why Crypto Prices Are Consolidating in Recovery Mode

The cryptocurrency market is cooling off from a major rally during the past few days that saw the global market capitalization blowing off the roof and breaking past $1 trillion for the first time in weeks. However, the market seems to be getting ready to consolidate again.

Crypto prices are consolidating

In recent weeks, the volatility across the cryptocurrency market has been significantly low, with Bitcoin trading in a manner that nearly reflected a stablecoin. The volatility of Bitcoin was even lower than some fiat currencies.

However, an unexpected spike in volatility was seen earlier this week, with $1 billion in short positions recorded. While the bullish rally made it appear that most cryptocurrencies would rally to monthly highs, it now seems like the market could consolidate again.

During the past 24 hours, Bitcoin has dropped by around 2% to $20,166. During the period, the largest cryptocurrency traded between $20,075 and $20,718, indicating that the volatility has been notably high.

However, as the coin drops toward the $20K levels, the volatility will likely drop as investors wait to see whether there will be another swing in the price action. Moreover, the bulls and bears are fighting for control as traders that bought during the recent rally attempt to dump their tokens.

The current movement could result in the global market cap dropping below $1 trillion. Given the trend that we have seen in recent weeks, it is likely that a drop below $1 trillion will have gotten rid of the weak hands that are currently selling, and the value of the crypto space could hold at around $940 billion to $960 billion.

Why are crypto prices consolidating?

One of the top reasons the crypto market could be consolidating is the anxiety surrounding the Federal Open Market Committee meeting in early November. During this meeting, the Fed is expected to announce an increase in interest rates, which could result in investors dumping risk assets such as crypto.

On the other hand, some reports say that the Fed will slow down the interest rate hikes in the coming months. Therefore, the uncertainty in what the Fed will do in the coming days results in indecision by traders on whether to buy or sell, resulting in prices consolidating.

BREAKING: Economists at @BlackRock are telling financial advisers that they expect "pivot language" at the next @federalreserve meeting when they expect Powell to announce a 75 BP FF hike followed by two smaller ones and a pause to get us to around 4.75%. More 130pm @FoxBusiness

— Charles Gasparino (@CGasparino) October 27, 2022

The other reason why the recent bullish rally is cooling off is because of the negative performance of tech stocks. Meta’s stocks have plunged by more than 20% over the past 24 hours after the company reported gloomy earnings following its massive investment in the metaverse.

A similar performance has also been seen in Amazon, which dropped significantly after hours after the company announced that it was expecting the holiday shopping season to be slower than what was earlier predicted. Apple is also down slightly during the past day.

The performance of tech stocks tends to have a notable effect on Bitcoin and, consecutively, the other cryptocurrencies in the market. Therefore, the tanking of stocks from some of the largest tech companies in the US has cooled off the recent rally made by Bitcoin and other cryptocurrencies. Therefore, the prices could continue consolidating as investors wait to see whether the market will break out of its correlation with the stock market.

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