Bitcoin recently free-falled, losing 43% of its YTD value and has lost nearly half in the last five days. It is now trading close to 60% from its all-time high in November. No other cryptocurrency has had any better luck with Stablecoins being “money-breaking”.
Bitcoin losses occurred during heightened geopolitical tensions and rising inflation. These are factors that should be bullish, not bearish, for a digital currency. However, other factors appear to be at play, such as rising interest rates, which eliminates risk for all speculative assets, as evidenced by the sharp decline in smaller Nasdaq stocks.
Is the recent bitcoin rout a crash or just another fix?
“Cryptonized” host Mark Fidelman thinks this is another fix that’s part of the crypto cycle. “These ups and downs are normal for cryptocurrencies. It’s a big roller coaster,” he said. International Business Times. “It’s different from stocks. It’s a cryptocurrency.”
Cryptographer Alex Baghdjian, partner and co-founder of Fundday Agency, agrees. “There is nothing to indicate that this downturn is no different from the previous crypto market downturns,” he told IBT. “The only difference is that the cryptocurrency market is now increasingly correlated with the larger financial markets and is driven by traditional factors such as interest rate hikes. So, the downturn in traditional financial markets is the collapse of the cryptocurrency market.”
Baghdjian traces this trend back to March 2020, when the Bitcoin price and the S&P 500 fell about 30% at the start of the COVID-19 pandemic. “But the positive thing is that every cryptocurrency market downturn has led to new innovations in cryptocurrencies, which will revitalize the market,” he added.
Xchange Monster CEO Felix Honigwachs has joined the choir of cryptocurrency advocates. “We were here many times before that volatility, and the possibility of a crash had a negative impact on the cryptocurrency,” he told IBT. “We should not associate the difficult period of the project with overall failure. Short-term losses are a potential downside, but the overall viability of cryptocurrencies remains at an all-time high. I doubt we will discuss this issue. .”
Professor Robert Johnson of Heider College of Business at Creighton University takes the opposite view. He believes that what we experience in the cryptocurrency market is a crash caused by liquidity exhaustion that drives investors away from speculative assets. “What we are seeing is a dramatic shift from risk-on to risk-off, and there is no more speculative asset than cryptocurrency,” he told IBT. “There have been people ‘investing’ in assets that don’t have intrinsic value. People will admit that they don’t know why they invest in cryptocurrencies other than the fact that they will appreciate in value. And much of that speculation is that “the Fed’s easing policy and Unprecedented levels of liquidity due to pandemic payments from the US government. Once the Fed and the US government both turned off the funds, the show for the cryptocurrency market started.”
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