Crypto markets face challenging times
Susannah Streeter, senior investment and markets analyst, at Hargreaves Lansdown commented that while by the end of the week, the crypto wild west was taking a breather after reeling from the crash brought on by the collapse of a so called ‘stablecoin’, the clamour for regulation of stablecoins has become louder after losses mounted up.
However, at the time of writing bitcoin and Ether had regained some ground, with bitcoin edging back up above USD30,000.
Streeter says that some traders may see the sharp fall this month as an opportunity to buy the dip at a time but, given the hugely volatile nature of the coins, the crypto house of cards could tumble further. “This latest plunge in the wheel of fortune demonstrates that speculating in cryptocurrencies is extremely high risk and are not suitable for investors who don’t have money they can afford to lose,” she says.
Bradley Duke of ETC Group described the difficult markets as due to new technology and some implementations (even seemingly excellent implementations) which had exploitable flaws. “It’s a Darwinian process,” he said.
Laurent Kssis at Europe’s latest ETP issuer Hashdex said: “Volatility has always been a key issue in the cryptocurrency market. It's not the first time we have seen the market decline rapidly. At least there have been four major crashes of bitcoin in the last seven to eight years, and each time the market has bounced back.”
Kssis commented further that first quarter 2021 was a phenomenal rally for bitcoin. “A correction based on interest rates, geopolitical issues ( Ukraine), Algorithmic stablecoin demise (Luna), end of covid (fewer people trading) and strong correlation to tech stocks (Nasdaq drops last Friday) has put the crypto industry back in perspective and will bounce back in a more linear manner over time? But for now its risk off for all investors.”
GlobalBlock wrote a crypto note asking if last week was ‘the Lehman Brothers moment for crypto or is the worst behind us?’
“Some have called this a ‘Lehman Brothers’ moment due to the contagion this may cause, however I am optimistic that UST’s fall would not be that catastrophic – a collapse of USDT would be though, and we have seen the largest stablecoin by market cap wobble over the past 24 hours.
“Despite retail sentiment being incredibly bearish, it has been announced that Citi, BNY Mellon and Wells Fargo have invested in crypto trading firm Talos, in a USD105 million funding round. This shows that amongst the ongoing fear in the market, established trad-fi institutions are entering the crypto space. It is a signal of where the space is headed in the long-term, regardless of short-term volatility.”