The rapid fall in the value of cryptocurrencies worries many. There is talk of failure. What are the triggers - what are the consequences? And is the crypto market in danger of a longer downward spiral?
It was supposed to be a big performance for American rapper Jay-Z and Twitter founder Jack Dorsey. What they really wanted to do was give poorer people in Brooklyn, NY free bitcoin courses to educate and share knowledge on the subject at https://bestcryptobrokers.net/crypto-brokers-kuwait/. But after this weekend, interest shouldn't be too much anymore: the largest and oldest cryptocurrency, Bitcoin, has fallen 14 percent to below $18,000, its lowest level since the end of 2020.
Bonds are interesting again with a change in interest rates
Fears in the financial markets as a whole played a major role in this development, said Søren Hettler, an analyst at DZ-Bank. “Several construction sites converge here,” he says. “On the one hand, much more restrictive central banks, which have made it clear that they will take action against high inflation rates – with determination and higher key interest rates. This is the point that the crypto market is worried about.” Private investors and large investors are pulling their money out of cryptocurrencies because the actions of central banks are making lower-risk investments like bonds more interesting again.
Loss of trust due to homegrown problems
But the downward spiral of Bitcoin, Ethereum and Co. is self-made too. For example, there is the Celsius Network, a kind of bank that also provides loans in cryptocurrencies and promises very high returns. Worried about financial difficulties, Celsius was forced to freeze payment transactions last week. Since then, it was no longer possible to transfer, exchange or pay out currency. A bitter loss of trust. "One overcomes great difficulties," Celsius head Alex Mashinsky said in a short video. Now they want to "stabilize liquidity." The social media community is unsettled. Even the head of the US Securities and Exchange Commission is urging investors to be more skeptical. According to Volker Brühl of Frankfurt University's Center for Financial Studies, the Celsius case shows that the problem is "a lack of regulation and oversight." Because transparency and investor protection “either did not work at all or only partially on such platforms, and investors are now noticing it.” Cryptocurrency trading in Nigeria is booming despite official denials, writes this independent source.
Massive loss in value since the beginning of the year
Bitcoin has lost over 60 percent of its value since the beginning of the year alone. Ethereum, the second largest cryptocurrency, even lost over 70 percent in price. The recent collapse of the Terra USD crypto project has also caused turbulence – a coin that should actually provide better risk protection. It didn't work out in practice. There are always big swings up and down in the crypto world. Expert Brühl does not currently rule out a longer downward spiral for Bitcoin & Co. “In fact, this trend can only be broken if many investors believe that currencies have now reached a certain bottom, that they are fundamentally undervalued and so on, so that buying interest will be higher,” says Brühl.