The crypts beat
Cryptocurrencies currently have only one direction: downward. Bitcoin has lost half its value this year. The market is in a sell-off mood, an analyst says.
Just looking hurts: cryptocurrencies have to beat again and accept big price losses. The top one, Bitcoin, loses 12 percent to around $ 23,900, falling below $ 25,000 for the first time since December 2020. Ethereum is hit even harder, falling by 17 percent. There is a sell-off mood in the market, said Timo Emden of Emden Research.
The catastrophe is reminiscent of the TerraUSD cryptocurrency crash in May, which ravaged the entire cryptocurrency market. Bitcoin has lost almost half of its value since the start of the year, while Ethereum has dropped by as much as about two-thirds.
There is one reason for the recent deep decline in the first place: very high inflation could force the US Federal Reserve to raise interest rates even faster and sharper than previously planned. Higher interest rates coupled with high inflation are poisonous to risky assets like cryptocurrencies.
This is mainly because many people suddenly run out of money to play with cryptocurrencies. A long excess of cheap money from central banks has prompted retail and professional investors to invest more risky, and many are now withdrawing.
A great promise
It’s ironic that cryptocurrencies will depreciate as inflation rises. Because fans of these projects regularly claim that Bitcoin, for example, offers protection against inflation. After all, there is only a limited amount. In fact, Bitcoin is not “digital gold”. To classification: The price of the precious metal has increased by approx. 1.5 percent since the beginning of the year.
Cryptocurrencies are more like technology stocks. Currently, they are among the biggest losers on the stock exchanges. Over the past few years, investors have been throwing their (borrowed) money at companies. Consequences: Startups scored fabulous in financing rounds, stock prices soared. My bet was that companies would burn money initially – but would make big profits in the future.
Similar arguments are made for many cryptocurrencies. The technology behind it will revolutionize the world of finance and beyond, that’s a promise. Perhaps blockchain technology will actually find its widespread use – but it doesn’t have to be.
Not everyone who invested in Bitcoin or Ether could do so with the belief that they are investing in the technology of the future. You bought bitcoins in the hope of a quick profit and were able to play.
They implant “Shitcoins”
This can be seen in a very extreme way in the so-called Shitcoinach. These are crypto projects created with the sole purpose of raising the price. If you get out in time before a disaster, you can make a lot of money – at the expense of others. Some of these shitcoins have literally been pulverized in the last few weeks.
The hype triggered by the krone pandemic has caused prices to skyrocket since November 2020, Bitcoin has risen to around $ 69,000. It’s been downhill since then. However, wild price fluctuations are not uncommon in the crypto market. Bitcoin has recovered from every failure to date. It is therefore quite possible that soon cryptocurrencies will rise again sharply.
But it can also be different. The price of cryptocurrencies has risen in recent years mainly because more and more people have been buying them. But the current boom, coupled with the return in interest rates, could mean investors will be much more cautious in the future. Moreover, some of them will soon have to sell their cryptocurrency holdings to pay their bills. This dynamics may cause further price losses.