While the volatile nature of Bitcoin (and altcoins like SHIB, ETH, DOGE) may seem exciting to some, its recent drop below $30,000 has many investors questioning what led to such a big change. Chris Kline, chief operating officer and co-founder of Bitcoin IRA, one of the leading cryptocurrency platforms, shared some of the factors he thinks are causing the recession. We will describe these factors under various headings. Here are the details…
Global uncertainty, economic downturn and impact of cryptos like Bitcoin, SHIB
According to Kline, as the era of “free money” is over and more investors are tending to make prudent choices, there is currently a We are faced with uncertainty. For example, when it comes to saving for retirement, people live longer these days and so an important factor to consider is the need for one’s retirement savings to last as well. So investments with a lower risk tolerance seem like a safer bet, but still, it’s a bet.
Although the duration of this current situation is uncertain, it is being addressed by the US central bank in the form of increased interest rates to restore price stability. In this year alone, we’ve seen the benchmark policy rate rise by three-quarters and is projected to reach 2.75 percent or higher by the end of the year, according to CME Group data. According to the expert, another factor contributing to market uncertainty is the current Ukrainian crisis.
Significant global market fluctuations have been reported in recent weeks as many investors try to forecast cost growth for oil, wheat and other European commodities. Linked to inflation, the Russia-Ukraine conflict has created more investor uncertainty, with questions about whether a recession could potentially follow.
Investors don’t know how to deal with the decline
Another key driver, according to the expert, is the mixed emotions shared by consumers and institutional players alike. There are two separate considerations: Some investors are cutting their losses and liquidating their cryptocurrency holdings. Others kept their faith and bought more digital assets. El Salvador is seen as the best example of “buying at the bottom”. As we reported on Kriptokoin.com, the country recently added $15.5 million worth of Bitcoin to its balance sheet.
The truth is that consumers and institutions have seen the rise and fall of crypto prices over the years. Some think that this too could be a historical lesson – a lesson that shows that despite the high volatility of cryptocurrencies, it has the ability to bounce back. Given the market uncertainty linked to inflation and the current geopolitical crisis, many US investors are distracted and have yet to fully feel the effects.
For example, the recent rise in tourism according to Klein is an example of the fact that many people ignore inflated costs. After just coming out of a pandemic and global lockdown, many seem to be choosing to focus on other things.
Terra’s (LUNA) collapse reverberated in the market
Bitcoin, the primary asset for stablecoin reserves, has been hit by the massive volume of recent liquidations, among the broader crypto market. Known for their ties to another currency or asset class, stablecoins are essentially designed to have a fixed value. Thus, when an asset appears vulnerable, the reserve asset will be enforced.
The recent collapse of stablecoin TerraUSD (UST) and Terra (LUNA) has generated quite a bit of buzz and concern among regulators and investors. It is important to note that this is not just a stablecoin case and its impact is being felt by other coins. However, the stablecoin market is still worth over $160 billion, according to CoinGecko. Cryptocurrencies like BTC, ETH, SHIB have always had their highs and lows. Klein ends his thoughts with the following statements:
In conclusion, Bitcoin is people’s currency and we remain the biggest driver for crypto prices. Cryptocurrencies have experienced peaks and valleys over the years, followed by more peaks and collapses. BTC is a volatile asset class for the modern investor that has shown time and again that it is not only here to stay, but will continue to touch our lives.
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