The cryptocurrency market has undergone explosive growth over the past decade, drawing increasing institutional and retail capital. As digital assets become more entwined with centralized financial systems, their price volatility and market behavior have sparked intense debate among investors and analysts alike. Recent market turmoil—marked by steep declines in Bitcoin, Ethereum, and other major cryptocurrencies—has exposed the limitations of conventional investment strategies, particularly technical analysis.
This shift raises a critical question: Can traditional financial tools truly apply to a decentralized, sentiment-driven asset class like crypto?
The 2022 Crypto Crash: A Wake-Up Call for Investors
From early 2022 to mid-June, Bitcoin plunged 32% to $20,555, down 35% from its year-high of $31,784. In Taiwanese dollars, that’s a drop from NT$1.36 million to just NT$615,000 per coin. The volatility was extreme—Bitcoin fell 15% on June 12 alone and another 11% on June 15. Ethereum followed a similar trajectory, crashing from a high of $3,521 to $1,025.
This wasn’t an isolated event. The collapse triggered a domino effect across the ecosystem:
- LUNA’s 99% crash earlier in the year set the tone.
- MicroStrategy, holding nearly 130,000 BTC worth $3.97 billion, faced over $1 billion in unrealized losses. Its $200 million loan backed by 19,466 BTC came under margin pressure as prices fell.
- Three Arrows Capital (3AC), a Singapore-based hedge fund, had pledged over 211,000 ETH as collateral. With prices collapsing, it was hit with margin calls and forced to liquidate at least 14,000 ETH.
- USDD, an algorithmic stablecoin issued by the "Tron Reserve," lost its dollar peg, dropping to $0.91 after its reserve purchased $50 million in Bitcoin and TRX just days before the crash.
- Platforms like Celsius halted all withdrawals, Coinbase laid off 18% of staff (1,100 employees), and Gemini and BlockFi followed with significant layoffs.
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El Salvador’s Bitcoin Gamble Backfires
El Salvador made headlines in 2021 by adopting Bitcoin as legal tender. President Nayib Bukele aggressively bought BTC during dips—purchasing 500 coins at around $31,000 in May. But when prices fell below $26,000 in mid-June, those bets turned sour.
Critics were swift. At the World Economic Forum in Davos, French central bank governor François Villeroy de Galhau stated that El Salvador’s experiment highlights the enormous risks of treating cryptocurrency as national currency.
The Core Debate: Is Crypto Really Money?
After repeated market crashes, the fundamental nature of cryptocurrency is being questioned anew: What is crypto, if not money?
Years ago, Morgan Stanley’s chief global strategist Ruchir Sharma speculated that Bitcoin could challenge the U.S. dollar’s dominance. The Financial Times even suggested that “Bitcoin’s rise reflects America’s decline.” But today, skepticism dominates.
Warren Buffett dismisses crypto as a modern-day Dutch tulip mania. Economist Nouriel Roubini calls Bitcoin the “mother of all scams.” IMF Managing Director Kristalina Georgieva argues that while Bitcoin may be called a “coin,” it fails as money because it lacks stability and intrinsic value. She warns that some cryptos resemble Ponzi schemes, unsupported by real assets.
Villeroy adds that real money must be:
- A reliable payment method
- Universally accepted
- Backed by accountability
By these standards, cryptocurrencies fall short.
Why Scarcity Alone Doesn’t Create Value
One common argument for Bitcoin’s value is its capped supply—only 21 million will ever exist. But scarcity alone doesn’t guarantee worth.
“Just because a cryptocurrency is scarce doesn’t mean it creates value. It must be convertible into USD—or another stable fiat—for people to invest,” says an anonymous fund manager with NT$1 billion in crypto exposure.
In practice, crypto is rarely used for payments. A single Bitcoin transaction takes about 10 minutes to verify and costs an average of $20 in fees—hardly efficient for everyday commerce.
Yet there are exceptions. After Russia’s invasion of Ukraine and its exclusion from SWIFT in February 2022, Bitcoin surged from $37,000 to $47,000. Russian officials openly discussed using Bitcoin and gold to receive payments for energy exports from countries like China and Turkey.
This use case challenges traditional views—showing that in times of geopolitical stress, crypto can function as a parallel payment rail.
👉 See how global events influence digital asset trends in real time.
The Growing Link Between Crypto and Traditional Markets
One of the biggest misconceptions is that crypto operates independently of traditional finance. Data shows otherwise.
Studies reveal a strong correlation between Bitcoin and the S&P 500:
- From 2013 to 2018, the correlation coefficient was 0.78, indicating a strong positive relationship.
- Arcane Research reported in May 2025 that Bitcoin’s correlation with the S&P 500 hit an all-time high.
- Babel Research found that since May 2020, Bitcoin’s 120-day and 240-day price movements closely mirror the S&P 500. The 30-day correlation reached nearly 0.8 in May 2025—the highest since July 2017.
This undermines the idea that Bitcoin is a hedge against stock market downturns or dollar depreciation. Instead, it behaves more like a risk-on asset, rising and falling with equities.
Why Fed Policy Has Mixed Effects on Crypto
Another key debate centers on how crypto reacts to central bank policies.
In 2020, when the Federal Reserve slashed interest rates, Bitcoin, gold, and stocks all rose together—a rare alignment of asset classes.
But in mid-2022, despite aggressive Fed rate hikes (typically negative for risk assets), Bitcoin rose 2.4%—confounding expectations.
Why? As more institutional capital flows into crypto, it becomes increasingly integrated with global markets. Price movements are no longer driven solely by supply and demand but by macroeconomic sentiment, liquidity flows, and investor psychology.
Why Traditional Technical Analysis Fails in Crypto
Lin Yuzheng, an options trading instructor for several brokerage firms, once applied his proven strategies—developed over a decade in equities and futures—to cryptocurrency trading.
“My usual methods failed completely. I realized that traditional technical analysis simply doesn’t work in crypto.”
While technical tools like moving averages, RSI, and Fibonacci retracements are staples in stock trading, they often misfire in crypto due to:
- Extreme volatility
- Low liquidity in altcoins
- Whale manipulation
- News-driven price swings
- Leveraged derivatives amplifying moves
Crypto markets operate 24/7 without circuit breakers—unlike traditional exchanges—making them susceptible to panic selling or pump-and-dump schemes.
👉 Learn how advanced analytics can adapt to crypto’s unique market dynamics.
FAQ: Common Questions About Cryptocurrency Market Behavior
Q: Can Bitcoin be used as a reliable store of value?
A: While some compare Bitcoin to digital gold, its high volatility makes it less stable than traditional safe-haven assets like gold or U.S. Treasuries.
Q: Why did major crypto platforms lay off employees in 2022?
A: Plummeting asset prices reduced trading volumes and revenue. Combined with liquidity crises (e.g., Celsius), many firms had to downsize to survive.
Q: Does crypto truly operate outside traditional finance?
A: Not anymore. With ETFs in Canada and Australia, institutional investment, and correlation with stock indices, crypto is deeply interconnected with mainstream markets.
Q: Are algorithmic stablecoins safe?
A: They carry significant risk if reserves are insufficient or poorly managed—USDD’s de-pegging is a cautionary example.
Q: Can technical analysis ever work in crypto?
A: Only when adapted. Traders must incorporate on-chain data, sentiment analysis, and macro trends—not just chart patterns.
Q: Will crypto recover from bear markets?
A: Historically, yes—Bitcoin has rebounded after every major crash—but timing and risk management remain critical.
Final Thoughts: Redefining Crypto’s Role in Finance
Cryptocurrency is no longer a fringe experiment. It's a global financial phenomenon intertwined with geopolitics, monetary policy, and investor psychology. While it challenges traditional notions of money and decentralization, its behavior increasingly mirrors that of speculative risk assets.
For investors, the lesson is clear: Don’t treat crypto like stocks—and don’t assume old rules apply. Success requires new frameworks built for speed, volatility, and sentiment-driven markets.
Core Keywords: cryptocurrency, Bitcoin, Ethereum, technical analysis, market volatility, S&P 500 correlation, decentralized finance, digital assets