Why Are Cryptocurrencies Down In 2022 – The impact was swift and widespread, with nearly 40 percent of bitcoin owners losing money on their investments, according to data from crypto intelligence firm Glassnode. more than a quarter of the market cryptocurrency The whole world has disappeared According to crypto analytics website CoinMarketCap, The selloff comes after terraUSD, a digital currency that is algorithmically valued against the US dollar. Start trading for less than $1.
Since then Major cryptocurrency investors have sold their holdings. Sending prices down to levels not seen since 2020 could be a sign of just how risky digital assets are.
Why Are Cryptocurrencies Down In 2022
To learn more, The Washington Post spoke with Ben McMillan, Chief Innovation Officer at IDX Insights, an asset management firm specializing in cryptocurrencies. and Molly White, a software developer who runs Web 3 Is Going Just Great.
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“We’re going to see consolidation in this industry,” McMillan said. “We had seen this movie before with internet stocks in the 90s. There was a moment of euphoria where Pets.com disappeared and they survived the Amazon family.”
Macmillan: This weekend there was a special event for cryptocurrency in the form of the dollar-breaking Terra Luna Stablecoin. cryptocurrency and should be stable They should have a one-to-one valuation in US dollars. It is where many investors seek refuge during volatile times.
Terra is an algorithmic stablecoin that has a market capitalization of almost $20 billion but has billions of dollars worth of bitcoins known as collateral. Therefore, there are many Terra Luna stablecoins that are not backed by anything other than other people’s beliefs in the system. All that happened was an old-fashioned cruise along the coast.
This is a death spiral. Coins that were once stable are rising like that. during the weekend until Monday morning I’m just starting to fuel the digital asset ecosystem. It was only straw that broke the camel’s back.
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White. I don’t think you can say that cryptocurrencies are dead in the real sense. But I think we may see more realization that investing in cryptocurrencies is not a good idea. Especially with money that’s not just fun. But very important in terms of your actual investment. our ability to pay our bills
The rose-tinted glasses come off a little bit. On the other hand, people are looking at these 20 percent yielding projects like Terra, and suddenly they see what happens when things start to go wrong and now there’s no money left for them. balcony I wouldn’t be surprised if public perception dropped a little bit and we stopped seeing a lot of ads and a lot of ticket sales and stuff like that. I don’t think it’s true to say that. cryptocurrencies will die, blockchains will disappear and cryptocurrencies will die. will not exist There is still a lot of money in there, despite what the market does.
Macmillan: Even encryption isn’t dead. But this only highlights the investor as a high-risk asset class. It also raises the question of what investors think about it. Many investors view gold as a digital form or as a hedge against inflation. In fact, bitcoin and other digital assets are traded like high-tech stocks. So I think there’s a shift in the position of how investors think about bitcoin, both in terms of where it should be in the portfolio and how risky it is.
I think we’re going to see consolidation in the industry. We’ve seen this movie before with 90’s internet stock. There’s a moment of euphoria when Pets.com disappears and they survive the Amazon family. We will have weaker projects that will not succeed. And investors will understand better where they will spend that money. Venture capitalists are more selective about the projects they support. Everyday users will be more discerning where they put their money.
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White: I think it’s a good time because some lawmakers look at stablecoins and start saying “This looks quite shocking.” I think it has caught the attention of regulators and lawmakers. Because they saw that people lost this money without protection. And they see these stablecoins as being really threatened outside of the cryptocurrency market. They began to think that maybe this was something we should pay attention to now.
And there doesn’t seem to be many setups they can squeeze in today that would change things immediately, but we’ve seen some regulatory interest in stablecoins.
Macmillan: So the regulators see stablecoins as an obvious area and should focus again. Which makes sense. This is where Main Street meets the crypto universe. Stablecoins is where most people enter. cryptocurrency Therefore, it is important to have standards regarding transparency and protection.
The collapse of the third largest stablecoin by market capitalization over the weekend has accelerated the work of regulators to start setting some standards regarding stablecoins and stablecoin issuance. like we met with banks I wouldn’t be surprised if regulators required FDIC-insured stablecoin issuers to have a minimum margin ratio. and minimum transparency standards
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McMillan: Yeah, when you look at the next 5-10 years, when you look at what’s evolving across blockchains including Bitcoin and Ethereum, when you see the power of this technology. It is impossible not to go . It does not mean that it will be an uptrend. This doesn’t mean the roads won’t be bumpy. This doesn’t mean we don’t drop 50 percent every year. But especially at these levels. As you begin to enter rather gloomy territory with lots of bad news. It’s hard not to see the bitcoin price increase in a year or two.
White. It is difficult to forecast the market at a reasonable level, for crypto it is very volatile, unpredictable and quite out of touch. which you may buy in a bear market But it could also mean that you are buying a bear market. and may always be less. I think people trying to buy scuba gear are not very smart. They are exposed to many risks in a situation that has just begun to deteriorate and may continue to worsen for a long time to come.
Catch up on the latest Silicon Valley news and how to take back control of your data and devices. Bitcoin, BTCUSD dropped +0.16% to $20,834 late Monday. This is the lowest since December 2020 and is down nearly 70.% from the all-time high in November. The No. 1 cryptocurrency traded at about $22,407 on Tuesday, down 5% over the past 24 hours, according to CoinDesk data.
The turmoil arose amid a widespread sell-off of risky assets. The Dow Jones Industrial Average -1.05% dropped nearly 900 points on Monday, while the S&P 500 SPX -1.45% entered the bear market. The Nasdaq Composite dropped -2.18%, down 4.68%.
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Moreover Investors were disturbed by the news that digital currency lending platform Celsius had suspended all client withdrawals and transfers between accounts just a month after the Terra blockchain crash eroded investor confidence in some crypto projects.
However, most of the mistakes of cryptocurrencies are “related to macros Because the cryptocurrency market is bearish after the latest CPI readings,” published on Friday, Titan investment analyst Greet Trakolhon said in an interview. The US cost of living rose 1% in May, pushing inflation to a 40-year high of 8.6%, while showing no signs of slowing down.
“I think it’s a macro thing,” said Bill Barhit, CEO of crypto financial services provider Apra, in an interview. “Right now we have a lot of fear in the market, the market has gone up several times plus it started higher in a bearish environment… We are in no risk mode for all assets as well as we are in no-risk mode. risk,” Brahid said.
Anthony Scaramucci, founder and managing partner of SkyBridge Capital, has a different opinion. “If the US market is down 3% or 4%, can crypto be down 5% to 7%? Absolutely.