$1.4 trillion evaporates. What’s happening with the crypto crash?

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  • The cryptocurrency market fell $ 1.4 trillion from its peak.
  • Bitcoin and Ethereum are trading like risky assets
  • High interest rate expectations have investors looking for a place to hide

Crypto investors do not have the best start for the new year.

To say the least.

Since the rise of the cryptocurrency market in November last year, when both Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) reached new highs all the time, more than US $ 1 trillion (AU $ 1.38 trillion) was eliminated from the global currency market. It is currently worth about $ 2 trillion.

And 2022 is a horrible thing.

According to data from CoinMarketCap, 98 of the top 100 cryptos fell for the calendar year. 2 emitting green is a stable coin linked to the US dollar. And their fractional profit (both up some 0.05%) is almost nothing to write at home.

While Bitcoin has risen 1.4 percent in the last 24 hours to $ 35,467, the world’s original cryptocurrency is still down 48% from its Nov. 10 high of $ 68,790. And it is down 26% so far in 2022.

What happened to the crypto crash?

Crypto investors are getting stuck in selling more risky assets.

Most of the sell-off was driven by growing confidence that major central banks around the world will raise interest rates sooner and stronger than most analysts had forecast last year.

Crypto assets are also facing new challenges from the emergence of government regulations in the United States and potential bans in Russia.

Commenting on cryptocurrency risk assets, Leigh Drogen of Starkiller Capital said (as quoted by Bloomberg):

It’s a more risky asset now that most of the crypto markets are Ethereum, Solana and all the other types that are just basic technologies that we are drawing huge assumptions of global growth today.

Stephane Ouellette, CEO of the crypto-platform FRNT Financial, points to the strong relationship between Bitcoin and altcoin values ​​and risk assets that are being hammered around the world:

Crypto is reacting to the same kind of dynamics that weighs on risk assets worldwide. Unfortunately, for some mature projects like BTC, there is a lot of correlation in the crypto asset class, it is almost certain that it will fall, at least temporarily, in the comprehensive alt-coin depreciation.

Hayden Hughes, CEO of Alpha Impact, explains why crypto is facing additional pressure in the current market:

Dissolving margin positions have caused a wave of additional selling pressure as assets held as collateral are forced to be sold to pay off margin loans. I expect it will take some time for the bottom to build and for confidence to return before expecting any gains.

Outlook for Bitcoin

Future price changes for the crypto market remain uncertain. As we looked at above, Bitcoin, Ethereum, and most of the value of altcoins are closely linked to global risk assets, which in turn are closely linked to central bank interest rates and the value of money.

As for Bitcoin, Antoni Trenchev, managing partner at Nexo, said (quoted by Bloomberg) “The fears and frustrations among investors are understandable. If we see a bigger sell-off, expect the Fed to intervene verbally. Words to calm the nerves and that is when Bitcoin and other cryptos will jump.

Taking a look at the technique, Trenchev added:

For now, Bitcoin is up against the wall after falling below $ 40,000 [US dollars]. A quick jump above that critical technical and mental level is undeniable. Failure to reverse quickly I exclude another $ 30,000 Bitcoin test before the Fed changes tack, but that should be the bottom at least in the middle of the mandate. And from there, I think we can have clean feet.

There you have it. If you are investing in cryptocurrencies, you may want to keep an eye on the US Fed.


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