Three causes of the collapse of cryptocurrencies and what can happen

Three causes of the collapse of cryptocurrencies and what can happen

Cryptocurrencies, especially Bitcoin, collapsed this Friday one day after the bankruptcy declaration of Silvergate and that it transcended that JP Morgan broke its link with the exchange gemini. They added advances that the United States would increase taxes on cryptocurrency miners and the possibility of a new rate hike by the Federal Reserve.

What happened to Silvergate?

Silvergate declared bankruptcy and hits squarely at the cryptocurrencies. Bitcoin loses almost 2% in the last 24 hours and falls to $21,600, its lowest level in the last month. For its part, Ethereum resists and the drop is 1%, pushing it below $1,500. Likewise, the market capitalization of cryptos once again fell below a trillion dollars.

Another of the largest partners in the cryptocurrency industry announced its bankruptcy and ended up consolidating the bearish sentiment of recent weeks. Last Friday, Silvergate announced that it would delay the publication of its annual results.

The Fed’s Cryptocurrency Warning

As if that were not enough, cryptocurrencies have had to deal with a tougher-than-expected Federal Reserve (Fed). President Jerome Powell revealed that the terminal rate level will be higher than anticipated due to stronger-than-expected labor market data and inflation falling more slowly than he would like.

“We have not yet made any decision on the March meeting,” Powell assured this Wednesday before the House of Representatives, although he has once again stressed that the Fed does not follow a “pre-established” path.

“The second day of statements by Powell it was as aggressive as the first, with one small exception: He said the data will determine whether the Fed will increase the rate of hikes. But, if Powell’s intent was to cool down the 50bps betting, it didn’t go according to plan”, explained Ipek Ozkardeskaya, a senior analyst at Swissquote Bank. In this sense, the CME FedWatch tool estimates that there is about an 80% chance that the central bank will push interest rates into the 500-525 range basic points. Just a week ago, the probability of a rise of this magnitude occurring was barely more than 30%.

Silicon Valley Bank

Now also the core of the global technology industry was hit by the abrupt fall of the shares of Silicon Valley Bank (SVB): he Thursday they lost 60% its shares and its capitalization was cut by two-thirds.

SVB had to go out and sell part of its portfolio at a low price, incurring losses of 1.8 billion dollars. Venture capital managers such as the fund Founders Fund and other managers They asked the investee companies to withdraw the money from the entity.

Can Bitcoin trade at lows?

“I suspect we could retest the lows reached last year as a result of the rate hike, but also because of the Fed’s current tightening regime, which is draining liquidity from the markets,” said Quinn Thompson, director of markets. of Maple’s capitals in Bolsamanía.

According to this expert, “much of this tightening of monetary policy is being reflected in the prices of the fixed income markets.” “Risk assets have yet to price in the potential for downside contagion, and this could spell trouble for equities and cryptocurrencies”he added.

Source: Ambito

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