The cryptocurrency market may be taking a breather, but its groundbreaking nature means there are no interruptions. Trading digital assets like bitcoin and ethereum works 24 hours a day, 7 days a week, unlike its conventional counterparts in stocks on the New York and London stock exchanges, which at least get the weekend off.
So one torrid week tends to meet another for this more avant-garde market. Bitcoin, the cornerstone of cryptocurrency, fell below the key level of $ 20,000 on Saturday morning, meaning it has fallen 34% in the last seven days, according to CoinGecko, which showed that ethereum, l another pillar of the market, it had fallen 40% to $ 994 in the same period. There are fears that the fall of bitcoin will trigger more sales, which will lead to a tumultuous seven days for digital assets.
The entire cryptocurrency market fell below $ 1 trillion last week, a precipitous drop from its $ 3 trillion high in November last year. A number of factors drove the falls, a mix of cryptocurrency-specific events and broader macroeconomic issues, and some of them will remain on the market this week as well.
On Monday, cryptocurrency lending platform Celsius Network halted withdrawals due to “extreme market conditions”, prompting a sale. Celsius, a bank-like company that offers customers high interest rates on its cryptocurrency deposits, has not yet lifted restrictions on withdrawals or announced the resolution of its problems.
Three Arrows Capital, a cryptocurrency hedge fund that makes heavily leveraged bets on cryptocurrencies, is also getting its future after being hit hard by the sale of digital assets. Amid rumors of insolvency last Wednesday, Zhu Su, the Dubai-based investor behind Three Arrows, tweeted that “we are in the process of communicating with the relevant parties and we are fully committed to resolving it.”
Kyle Davies, co-founder of Three Arrows, gave more clarity to the Wall Street Journal on Friday, saying the company was exploring options such as selling assets and rescuing another company. “We’ve always believed in cryptography and we still are,” Davies said.
But for others there is less belief that the problems will go away in the short term. Faith in cryptocurrencies was undermined last month by the collapse of the earth, a so-called stablecoin, the value of which was supposed to be tied to the dollar.
“I would say the dust has not yet settled,” says Teunis Brosens, chief digital finance economist at Dutch bank ING. “Investors can continue to act on their doubts and test the stability of various stable currencies, platforms and crypto companies. We could see more casualties in the form of liquidity in certain currencies that dry up, stable currencies lose their link and funds must stop bailouts. “
Brosens adds that some of the issues affecting the equity and bond markets have had an impact on bitcoin. Cryptocurrency was seen as a hedge, or protection, against inflation. This has not been the case recently, as rising inflation has pushed central banks to raise interest rates, a combination that always affects risky assets.
“Bitcoin, in fact, is not seen today as an inflation-proof value reserve,” says Brosens. “On the other hand, bitcoin and crypto as a whole have behaved much like traditional risky assets so far this year, retreating as fears of inflation and rising rates rise.”
Some market watchers believe that cryptography will not be completely detached from the wider markets. “What we’re used to seeing with cryptography, and bitcoin in particular, is that it’s moving with the stock market,” says Kim Grauer of Chainalysis, a blockchain research firm. “There are periods that we’ve seen in the last few weeks when inflation figures came in, the Fed raises rates, the market tanks and bitcoin continues. But it really recovers quickly and reconnects with the stock market.”