Cryptocurrencies have also been dragged down by the widespread sell-off in risky assets due to concerns over high inflation and rising interest rates. Sentiment is especially fragile, with reportedly dollar-pegged tokens falling.
Bitcoin, the largest of the cryptocurrencies by total market value, managed to bounce back in the Asian session and was trading around $30,500, recovering somewhat from a 16-month low of around $25,400 hit on Thursday.
Nonetheless, it remains well below levels a week ago, which hovered around $40,000, and barring a rally in weekend trading, it is headed for a seventh straight weekly loss.
“I don’t think the worst is over,” said Scottie Siu, chief investment officer at Axion Global Asset Management, a Hong Kong-based firm that runs a cryptocurrency index fund.
“I think there will be more declines in the next couple of days. I think what we need to see is open interest (pool of pending derivative contracts to be settled) plummet much more, until the speculators are really out, and that’s when I think that the market will stabilize,” he added.
Cryptocurrency-related stocks have taken a hit. Those at brokerage Coinbase stabilized overnight but were still racking up losses in just over a week.
In Asia, Hong Kong-listed Huobi Technology and BC Technology Group, which operates trading platforms and other crypto services, were seeing weekly declines of more than 20%.
However, financial markets in general have so far seen little repercussion from the cryptocurrency crash.
According to The Economist, “the crypto infrastructure is broken” and the crisis observed in recent days bears the hallmarks of the old financial collapses of yesteryear.
“Cryptocurrencies are still very small and their integration into the broader financial markets is still infinitesimal,” said James Malcolm, head of currency strategy at UBS. “This idea that what happens in crypto stays in crypto…in many ways that’s where we’re still at right now.”
“All asset classes except commodities have been dragged down by a sharp sell-off. Risk aversion soared as the Federal Reserve stepped up its tightening monetary policy by raising interest rates on the back of inflation and tightened financial conditions Bitcoin (BTC) decline started earlier (six months), was deeper (-60% from $69,000), but made significantly worse by ongoing contagion from stablecoin UST/USD, although it is also the less surprising (it’s the 10th crash of the decade),” said Ben Laidler, global markets strategist at eToro.
According to some analysts, these decreases are explained by the high levels of inflation in the United States and by the tightening of the monetary policies of the central banks. All in all, Bitcoin and Ethereum are the ones that endure the most, since other less popular ones, such as Polkadot or Cardano, leave 80%. In addition, Bitcoin’s fall exceeds 61% losses from the all-time highs it reached on November 10, 2021, when it reached $68,991. In social networks, experts speak of “collapse”, while some investors in these currencies expect a rebound effect and ask that it be ‘hold’, that is, not to sell.
The fall does not seem to be exclusive to cryptocurrencies: a similar message could come from the global economy if we take a look at the big technology companies, whose shares on the stock market have also lost a lot of ground since reaching all-time highs a few months ago.
Source: Ambito
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