2022 – Crypto panic as digital assets track stock prices in a downward spiral | Cryptocurrency

TThe cryptocurrency market could use a pause, but its anti-conventional nature means there is no pause. Trading in digital assets like Bitcoin and Ethereum operates 24 hours a day, 7 days a week, unlike their traditional stock counterparts on the New York and London stock exchanges, which are at least on weekends.

So for this evolving market, a hot week goes by the following week. Bitcoin – the cornerstone of the cryptocurrency – fell below the key $20,000 mark on Saturday morning, which means it is down 34% over the past seven days, according to CoinGecko, which shows that Ethereum, another pillar of the market, has fallen by 40 in The cent has fallen to $994 over the same period. There are fears that Bitcoin’s fall could trigger more selling, leading to another turbulent seven days for the digital asset.

The overall crypto market fell below $1 trillion last week, a sharp drop from the $3 trillion peak in November last year. A number of factors led to the declines – a combination of cryptocurrency events and broader macroeconomic issues – and some will continue to come into the market this week.

On Monday, crypto lending platform Celsius Network suspended withdrawals due to “extreme market conditions,” which led to a selloff. Celsius, a bank-like company that offers customers high interest rates on their cryptocurrency deposits, has yet to lift restrictions on withdrawals or announce a solution to its problems.

Three Arrows Capital, a cryptocurrency hedge fund that makes high-leverage bets on crypto assets, is also upending its future after being hit hard by the sale of digital assets. Amid rumors of bankruptcy, Zhu Su, the Dubai investor behind Three Arrows, tweeted last Wednesday that “we are in the process of communicating with interested parties and are fully committed to making this clear.”

Kyle Davis, co-founder of Three Arrows, provided some clarifications on the matter The Wall Street Journal On Friday, it said the company was exploring options that would include selling the assets and bailing out another company. “We have always believed in cryptocurrencies, and we still do,” Davis said.

But for others, there is less belief that problems will go away in the short term. Confidence in cryptocurrencies was eroded last month by the collapse of Terra, the so-called stablecoin that was supposed to be pegged to the dollar.

“I would say the dust has not settled yet,” says Teunis Brossens, chief digital finance economist at Dutch bank ING. “Investors can continue to respond to their skepticism and test the stability of various stablecoins, platforms and crypto companies. We could see further losses in the form of liquidity in some coins drying up, stablecoins losing their peg and funds being forced to stop paying.”

Brosens adds that some of the issues affecting the stock and bond markets have affected Bitcoin. Cryptocurrency was seen as a hedge or protection against inflation. This has not been the case lately as rising inflation has prompted central banks to raise interest rates, a combination that always affects risky assets.

“Bitcoin is not seen as an inflation-proof store of value today,” Brusens says. “Instead, so far this year, bitcoin and cryptocurrencies as a whole have largely behaved like traditional risky assets, plummeting as fears of inflation and price hikes mount.”

Some market watchers believe that cryptocurrencies will not completely decouple from the broader markets. “What we’ve seen with cryptocurrency, and Bitcoin in particular, is that it moves with the stock market,” says Kim Grauer of Chainalysis, a blockchain research firm. “There are periods that we have seen over the past few weeks where inflation numbers have fallen, the Fed has raised interest rates, the market has fallen and Bitcoin has followed suit. But it is recovering very quickly and is correlating with the stock market again.”

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