Fears? Uncertainty? A market like this is always shaken by events and the associated emotions. Let’s review three reasons that could be behind the drop seen in recent days.
Undoubtedly, the fall seen in the price of the main cryptocurrencies has put more than one on alert, following the markets with special zeal in search of possible trends and / or indicators that give signals about what may happen in the coming hours. However, the unpredictability of the market always does its thing, so some choose to look back and understand the reasons behind this atypical behavior, in order to better understand the scenario and think with a much more complete perspective on what is currently happening.
If you belong to the latter group of people and are especially curious about the possible events associated with this drop seen in the market, below we review three events that could be linked to some extent to the trend that follows the price of major cryptocurrencies at this hour:
1- US Federal Reserve increased interest rates
Let’s start at the beginning, because last week the US Federal Reserve (FED) the main entity responsible for the monetary and economic policies for the North American country, announced a series of measures to be implemented at a local level to deal with the growing inflationary levels, for which it proposed a new increase in interest rates equivalent to half a percentage point (o.5%).
The measure was announced by the president of the FED, Jerome Powell, who confirmed what many had expected weeks ago and added that this is part of the set of measures contemplated by the state institution to support the opposite of Resistance, it is a threshold that crypto’s price doesn’t fall below. the local economy, to which he commented:
“Inflation is too high…it is essential that we bring inflation a general increase in prices and fall in the purchasing value of money. down if we are to have a sustained period with strong labor market an area or arena, online or offline, in which commercial dealings are conducted. conditions that benefit everyone.”
For Powell and FED is fundamental to address a place where cryptocurrency can be sent to and from, in the form of a string of letters and numbers. the problems that are shaking the local economy, which is why they have as a goal to return to the 2% inflation rate that existed before the pandemic by COVID-19, although he indicated that this will be done gradually in order to ensure a steady progression towards acceptable and beneficial levels for all:
“We’re really going to raise rates and quickly get to levels that are more neutral and then that are really tight … if that’s appropriate once we get there.”
By the time of the announcement, major crypto market exponents saw a fairly positive reaction and a spike in trading operations associated with purchases. However, once the enthusiasm dissipated, the drop seen in the price of the most reputable cryptocurrencies began, reaching its lowest point yesterday when coins like Bitcoin the biggest and most popular cryptocurrency in the world. It is a decentralized digital currency that enables users to make trustless peer-to-peer transactions. y Ethereum a decentralized open-source blockchain with smart contracts functionality. were seen below 50% of their all-time highs.
Analysts and enthusiasts alike associate the measures of the FED with the fall in prices because this means much less liquidity how easily a cryptocurrency can be bought and sold without impacting the overall market price. for investors who operate with cryptocurrencies, which is why both the capital capital is most commonly defined as the large sum of money you would use to invest. that is within this market and the one that would be entering is compromised.
2- FSO, Earth and rumors about the sale of BTC
One of the cases that generated the most commotion in the context of the generalized fall that the market saw was that of UST, the stablecoin a cryptocurrency with extremely low volatility, sometimes used as a means of portfolio diversification. Examples include gold-backed cryptocurrency or fiat-pegged cryptocurrency. launched by the team of Earth, which was significantly affected and experienced an abrupt drop that compromised its parity with the US Dollar, falling to a low of around USD $0.65 yesterday.
Let’s keep in mind that being a stablecoin that operates under an algorithmic model, its parity with the US dollar is based on a set of actions that are processed automatically depending on market conditions. As it is backed by tokens MOON, This contemplates burning destroying a certain number of digital coins to reduce their issue. This method is used to fight inflation and increase the value of cryptocurrency. All token burning transactions are recorded in the blockchain as a transaction. Therefore, anyone can verify that the coins were destroyed. and minting systems to maintain the expected balance, but recently the creator of Terra’s ecosystem, Do Kwon, announced that it would now be backed up in reserves of Bitcoin.
As the price of Bitcoin and of LUNA, the organization responsible for the finances of UST, Luna Foundation Guard (LFG ), has been taking some measures to counteract the fall in the price of the stablecoin, among which are sales BTC of its reserves to be able to balance again the balance that was notably broken in the most critical hours of last May 9th.
Rumors suggested that Terra found it necessary to sell a large amount of BTC to keep in safekeeping UST, but Luna Foundation Guard refuted reports that they had virtually no reserves left in stock Bitcoin by publishing the current state of the wallet a place where cryptocurrency users can store, send and receive digital assets. where they are stored, revealing part of the management of the respective finances.
Last clip withdrawn by the LFG was ~37K BTC. Similar to the last deployment, it has been loaned to MMs.
Very little of the recent clip has been spent but is currently being used to buy $UST.
— LFG | Luna Foundation Guard (@LFG_org) May 9, 2022
The fear and uncertainty surrounding the measures may be that the Earth about UST are still present, which is why the Luna Foundation Guard indicated that in the coming hours will publish more details on its plan of action in the midst of the bearish momentum that is lived at this time.
3- Crypto companies shake up on the stock exchanges
Muchos tienen claro que el ecosistema cripto va muy de la mano con la evolución de los mercados tradicionales, y esto es una realidad muy palpable para las empresas del sector que cotizan públicamente sus acciones en las principales bolsas de valores.
A report published yesterday by the website CoinDesk reflected that Coinbase is an American company that operates a cryptocurrency exchange platform. y MicroStrategy, two of the most recognized companies currently in the cryptocurrency cryptocurrencies are digital currencies that use cryptographic technologies to secure their operation. sector, saw significant drops in the price of their shares on stock exchanges like NASDAQ. In the first case its price fell by more than 20%, while the company led by Michael Saylor saw a 25% reduction in the value of its shares.
These results were directly associated with the large selling volume how much cryptocurrency has been traded over a set period, such as the past 24 hours. for the shares of the aforementioned companies, which was also associated with the fall in the prices of major cryptocurrencies, which hit their lowest points of the half-year trading day yesterday. Analysts note that this type of behavior also tends to discourage investors less familiar with the digital digital technologies are these electronic tools that have the ability to generate, store or even process data. currencies sector, which is why many do not take the expected step, or on the contrary, retract their investments.
Emotional marketing and the domino effect
While there are many aspects that could play against the price of major cryptocurrencies these days, the truth is that what has been seen reinforces the thesis that the crypto market is highly volatile and very emotional, so abrupt changes are always just around the corner when the ecosystem is shaken for better or worse.
It tends to have a lot of impact what happens mainly with Bitcoin and some of the most reputable currencies in the sector, since abrupt changes in such cases usually generate a domino effect that drags a good part of the most reputable exponents, precisely because of the mere sensation of changes that could affect the respective ecosystems.
Let’s review for example the case of Bitcoin, The currency currency is a medium of exchange that defines value. is now trading at around USD $31.251 per unit, capitalizing on a 1.20% loss in the last 24 hours, which has mitigated the magnitude of yesterday’s decline. What we see now is that trading volume is above USD $60.825 million, having increased more than 4% from last May 9th, which suggests much more movement in the major markets in buy/sell trades.
Remember that “The market is you”.
En todo caso, la invitación es a tener presente que los usuarios de las criptomonedas son quienes hacen parte del mercado, por lo que las propias acciones también contribuyen en alguna medida a la caída / aumento en los precios de los principales exponentes.
Therefore, it is important to be clear at all times about the current state of the ecosystem beyond the abrupt fluctuations in the prices of cryptocurrencies of interest. This helps to make better decisions from the commercial point of view, contemplating possible scenarios in the medium / long a situation where you buy a cryptocurrency with the expectation of selling it at a higher price for profit later. term, taking into account an account is essentially a whose purpose is to track the financial activities of a specific asset/ that markets in general have their cycles, so the current situation could also experience changes and turn around at any time.
- Michael Saylor Suggests MicroStrategy Will Never Sell Its Bitcoins
- Treasury’s Janet Yellen signals UST collapse in latest call to regulate stablecoins
- Justin Sun’s Tron DAO, bought 500 bitcoins in the fall, will back new USDD stablecoin
Article by Angel Di Matteo / DiarioBitcoin
Images of Unsplash