TerraUSD (UST), a stablecoin that uses algorithms to maintain its value by being pegged to the US dollar, recently lost the dollar peg, causing Luna to lose more than 99 percent of its value. Philipp Sandner, head of the Blockchain Center at the Frankfurt School of Financial Management, said in an interview that Bitcoin and other cryptocurrencies “drifted” with the collapse of UST and Luna. As Kriptokoin.com, we are transferring the details.
The days of cheap money are over
Sandner said that the crash was caused by multiple overvaluations and inflated token prices, which he called “almost monstrous structures” emerging in the crypto system. But it’s not just UST that’s causing problems for bitcoin and the crypto world. Crypto analyst Timo Emden from Emden Research, a research firm focusing on cryptocurrencies and blockchain, said that rising interest rates are also affecting prices, and the days of cheap money are over. Emden continued his statement, referring to the record low interest rates of the past few years:
Rising interest rates are proving to be poison for risky asset classes.
Bitcoin and other cryptocurrencies appear to be correlated with tech stocks as well, as the crypto crash followed a sell-off in more established stocks. But Emden still believes it’s a “fantastic and promising” technology. Emden continued:
All the swan songs going to Bitcoin, in my view, it’s too early. But from a fundamental and technical point of view, the outlook has blurred considerably. BTC’s drop to $20,000 shouldn’t come as too much of a surprise
Bitcoin looks bleak in the short term but positive in the long term
The current macro outlook for crypto analyst Thomas Faber of Rudy Capital is “relatively bleak”. However, Faber thinks the long-term outlook remains “positive”. In his statement regarding Bitcoin, the analyst said:
Nothing has changed in the fundamentals, value propositions and visions of most crypto projects. In many areas, such as decentralized finance, disruptive firepower remains unchanged and will continue to gain momentum in the years to come. In the short term, however, investors should expect further declines.
Continuing to express his views on bitcoin and cryptocurrency markets, his analyst said that the latest crash shows the current reluctance towards risky asset classes. Saying that investors are fleeing from their investments in panic, the analyst continued as follows:
No one wants to catch the falling knife right now. The fundamental and technical situation remains unclear. Stock market lights are still red. Many investors must decide whether to wait for the crash or try to sell their remaining profits at the “last second”. So there is a danger that the downward trend will continue. The trend has evolved, which is hard to stop. Investors need to prepare for more uncertainty in the hours and days ahead.
One of the worst crises for Bitcoin and cryptocurrency markets
According to Sandner, the crypto crash is for investors, especially those who have never really been interested in cryptocurrencies but have invested in any tokens. carries too many risks. The professor believes we are in one of the worst crises for crypto assets, adding:
He has had crashes like this several times. The first time you experience a crash, you are shocked. Secondly, you’re also shocked that you think it won’t happen again. But then you realize that just like stock markets, crypto markets crash frequently. incredibly overvalued… In a few years, Bitcoin will fall again. Volatility provided arguments for stricter regulation to curb crypto’s wild growth. Many people have lost a lot of money and now do not have the resources or the will to invest any more. That’s why they turned their backs on crypto. This creates a lack of liquidity and means that the price cannot rise.
Still, Sandner doesn’t believe crypto prices will continue to drop any further at this time, and my instinct is that we’ve reached the bottom. Bitcoin is down about 25 percent last month, Ethereum is down about 35 percent and Solana about 50 percent. Sandner said the tokens all seem to be related to each other. If Bitcoin drops another 25 percent, then other cryptocurrencies will drop another 35 percent or 50 percent due to correlation, which means they will crash by about 75 percent in just a few weeks.
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