Currently, the cryptocurrency market is in upheaval. Central banks’ rate hikes have dried up liquidity, resulting in less trading activity and, ultimately, lower prices for cryptocurrencies. What do you think about this? Both Bitcoin and Ethereum’s year-to-date returns have decreased by 40 and 50 percent, respectively.
The current price of Bitcoin is $30,428.00, down from its peak of $68,000. According to analysts, the cause for the decline in crypto markets is as follows: “For the previous few months, cryptos have been valued based on fluctuations in supply and demand rather than any fundamental intrinsic measure of their genuine worth. So, even if they didn’t know or comprehend it, people were still purchasing. A lot of money was moving around the globe at that point, and it was all driven by that.
Many asset classes have benefited from this liquidity, including the majority of the cryptocurrency market. As a result, individuals began to consider the possibility of making money by investing. When interest rates are high, you discover that you lack the liquidity to invest in the stock market. There’s a lot of pressure to get things off the ground immediately. And this explains the recent crypto market collapse.
It’s a matter of how much people think the cryptocurrency is worth and how much they’re willing to pay for it “said former finance secretary Subhash Chandra Garg. In a similar vein, Fintrekk Capital’s CEO, Amit Gupta, believes that the crypto market fall is a worldwide phenomenon. “Crypto’s rise is a worldwide phenomenon. Cryptocurrency prices have plummeted as central banks have raised interest rates and the dollar index has risen. Traders (speculators) are reporting losses as volumes have decreased. Recent financial reports from Coinbase, a US-based cryptocurrency exchange platform, reveal a dramatic decline in retail crypto trading volumes.
According to Nischal Shetty, the CEO and co-founder of WazirX, a cryptocurrency exchange, macroeconomic variables, and poor global signals are to blame for the current market turmoil. “The steep decline in cryptocurrency prices that are now being seen is a worldwide phenomenon. The Russian-Ukrainian war, rising prices, and other factors in the macroeconomic environment all play a role in this trend. Cryptocurrency markets and conventional financial markets are both experiencing a correction, which is fascinating to notice.
Cryptocurrency markets, like all other financial markets, go through cycles of ups and downs, and right now, we’re in a bearish one “Says Shetty. Shetty went on to say, “Buying the downturn has become popular in India, where buyers have taken a little lead in the market. Since the beginning of April, 75% of trading sessions have been buyer-dominated. Despite the current market turmoil, investors seem to still have faith in the market “, it’s a good idea.
Earlier today, during Asian trading hours, Bitcoin plunged to a 24-hour low of $25,402, a significant loss. BTC fell to a 52-week low before surging back beyond the $29,000 mark, matching its previous low in December 2020. Although Bitcoin’s noon rebound saw the original crypto fall more than 5% in the previous 24 hours, it is still down more than 5%.
As of now, Bitcoin values are down almost 39 percent from their all-time highs of $69,000 set in November 2021 and are trading far below their current levels. The price of Ethereum has fallen more than 13% in the previous 24 hours and is still below the symbolic $2,000 mark. Stablecoins, such as UST and LUNA, have been a major factor in this week’s decline, and crypto investors should keep an eye on this sector of the market. In the minds of critics of the Terra ecosystem, a fundamental weakness in TerraUSD’s process should not come as much of a surprise.
The Luna Foundation Guard (LFG), the Terra network’s nonprofit supporter, shifted all of its holdings to Bitcoin exchanges to safeguard the stablecoin’s dollar peg. As of this writing, LFG’s bitcoin reserve balance has been completely depleted. Tether (USDT), the first stablecoin, has taken a beating from the negative mood. For a short while, Tether’s dollar peg was broken, falling to $0.97 during the Asian trading session, although it has since recovered to $0.99.
Coin prices indicate that investors do not trust these extremely volatile assets as safe havens during difficult economic times. Historically, gold and stock prices have had an adverse association, and this has been the case so far in 2022. In 2022, the price of gold is expected to rise roughly 3%, but the S&P 500 has lost over 16% this year. Pressure on the stock market has been fueled by concerns about rising U.S. inflation and the Federal Reserve’s ability to take harsh steps to combat it. U.S. prices jumped 8.3% year-over-year in April, making it the highest inflation rate since 1981, according to the Consumer Price Index (CPI).
“Inflation, increasing interest rates, and the conflict in Ukraine remain the dominant concerns,” says Commonwealth’s senior vice president of investment management and research, Brian Price. “We’re beginning the week under pressure since there are no significant positive triggers in the market right now.” This sell-off in equities is more proof that investors are looking for safety from the possible negative economic effects of tighter Fed policy.
Concern among investors and queries about why crypto prices have become more vulnerable to stock-market gyrations have been sparked by the cryptocurrency market’s biggest selloff in over two years. Stablecoins, in particular, are getting a lot of attention right now. Stablecoins, as the name indicates, are digital assets whose value is tied to a more stable asset, such as the U.S. dollar or gold, so reducing the risk of their value plummeting dramatically. The collapse of terraUSD, a sort of so-called stablecoin, and recent attempts by the US Federal Reserve to battle rising inflation and stabilize markets are seen by industry analysts as the primary causes of the current cryptocurrency market decline. It should be noted that there is no one and the primary reason behind the crashing of the crypto market. To understand the real reasons for the crypto market’s decline let’s start with macroeconomics.
In early 2020, the Federal Reserve lowered interest rates, or the cost of borrowing, to stabilize the economy in the wake of the epidemic. In the end, inflation soared to its highest level in four decades as a consequence. Traders pumped money into the stock market and cryptocurrency markets in anticipation of higher profits because of the abundant liquidity. In general, increasing prices hurt people’s economic well-being since our salaries aren’t growing in tandem with prices.
The Federal Reserve boosted interest rates by half a percentage point earlier this month, the highest rise in more than two decades, to mitigate the impact. As a result, the Federal Reserve is lowering the money supply and is projected to keep raising interest rates in the future. There is a lot to worry about for investors. Since the beginning of the year, the S&P 500 and Nasdaq stock indices have each plummeted more than 20%. According to statistics acquired by CoinGecko, which examines the digital currency industry, the market valuation of the cryptocurrency market has dropped from approximately $3 trillion in November to roughly $1.3 trillion presently. For the first time since July, the price of bitcoin fell below the $30,000 mark earlier this week.
TerraUSD, also known as UST on the list, and the impact it’s having on its sister cryptocurrency, Luna, have piqued the interest of crypto enthusiasts recently. Developed in South Korea, the Terra network is a blockchain project that has spawned two coins. As UST’s collateral currency, Luna serves as a medium of exchange. Created as a form of crypto asset that provides better stability amid market turbulence, stablecoins such as TerraUSD and luna have since been debunked. Considering that the UST token’s value is tied to the US dollar, it will always be worth $1. A dollar’s worth of luna may be traded for a dollar’s worth of currency if the value falls below a dollar.
CoinGecko data shows Luna was trading at under $3 in May 2019 and reached an all-time high of over $116 in April, while other large-cap cryptocurrencies were losing ground. There was an increase in the supply of luna tokens when the price of UST plummeted, which caused the price of luna to fall. Luna’s value dropped by 99 percent on Thursday, making it one of the most volatile stocks on the market. Luna’s dramatic value decrease was deemed by Bloomberg Intelligence to be the worst day ever for financial products, leading cryptocurrency exchanges to delist the coin, putting an end to its trading as a result of a lack of liquidity.
As the cryptocurrency market crashes there are many industries that try to take advantage of it. Nowadays many gamblers who want to generate money start to buy cryptos at a low price, gamble, get winning, and then invest their money in the crypto market. For this reason, the popularity, as shown here, increased at the moment of a crypto market crash. Because of this tendency in crypto betting and several industries, some experts say that the crypto market crash may recover soon and the condition of the market become comparatively stabilized.
All asset markets have witnessed a correction since the Fed’s dramatic liquidity tightening announcements in November. An increasing number of analysts believe that there may be an all-time high link between the conventional financial markets and the cryptocurrency sector. Defiance ETFs CEO and CIO Sylvia Jablonski said the Nasdaq-ETF correlation is now at 0.82, up from a historical low of 0.50. (on a scale of 0 to 1). Investor mood is being influenced by the fact that traditional and stock markets are going, in the same way, more often than ever before. Cryptocurrency and IT stocks, which were particularly badly hit during the current market downturn, are now showing a greater association, according to experts.
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