Bitcoin crash exposes idea of ​​uncorrelated asset as ‘big lie’

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Bitcoin crash exposes idea of ​​uncorrelated asset as 'big lie'

A crypto sell-off resumed on Monday, with Bitcoin falling below $30,000 with global stock markets remaining under pressure.

The largest cryptocurrency fell as much as 6.2% and was trading at $29,835 at 4:54 p.m. in New York. Other tokens including Ether and Avalanche were also on the defensive. US stocks fell as investors took stock of the latest signs of economic malaise in the US and China.

Overall, however, digital asset markets were still calmer compared to the worst of last week’s turmoil from the collapse of TerraUSD stablecoin UST. Deus Finance’s DEI token lost its dollar peg on Monday, though it only had a market value of about $63.5 million, compared to UST’s $18 billion.

“I think he will continue to trade the stock market and risk assets,” said David Donabedian, chief investment officer at CIBC Private Wealth Management. “That is the big lie that has been exposed, the idea that it is a new asset class that will help diversify your portfolio has been shattered.”

Bitcoin fell to a low of $25,425 on Thursday after algorithmic stablecoin TerraUSD fell apart, throwing the entire ecosystem that supports it into chaos. At its height, market panic engulfed the $76 billion Tether stablecoin, a key cog in crypto assets that briefly fell from its dollar peg.

“We have witnessed the rapid decline of a major project, causing ripples throughout the industry, but also a new resilience in the market that did not exist during the last market crash,” Changpeng Zhao, CEO of cryptocurrency exchange Binance Holdings Ltd., he tweeted on Sunday.

One difference between the current environment and other protracted downturns like the “crypto winter” in 2018 is the number of institutions now participating in the market, which may be a source of support, said Paul Veradittakit, a partner at digital asset manager Pantera Capital. .

“Compared to 2018, there are more institutional investors exposed to crypto and most see this as a buying opportunity,” said Veradittakit.

ebb rally

Monday’s price action saw Bitcoin give back some of Sunday’s rally. The total market value of cryptocurrencies has shrunk by some $326 billion in the past seven days to roughly $1.33 trillion, according to data from CoinGecko. Bitcoin is 57% below its November all-time high.

While the crypto markets may have digested the worst of the TerraUSD fallout, the asset class faces other challenges, notably rising global interest rates and tighter liquidity conditions.

Bitcoin’s current lowest support is $27,000, “which is likely to stabilize price action for the next couple of days,” said Edul Patel, CEO of Mudrex, an algorithm-based crypto investment platform.

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