Crypto market crash: Where does the buck stop?

There has been chaos in the world of cryptocurrencies in recent days. With falling stock markets, geopolitical tensions and the lingering pandemic creating the perfect storm, it must be one of the most difficult times for investors, and especially for crypto investors.

Let’s look at the statistics. Bitcoin, the world’s largest cryptocurrency, is back to its January 2021 levels of $ 27,194 (as of May 12, 2022) and has lost over half of its value since reaching its peak of $ 68,990 in November 2021.

The world’s second largest cryptocurrency by market capitalization, Ether fell 23% to $ 1,841.12. Other cryptocurrencies such as XRP have fallen by 34%, Solana has fallen by 38%, Cardano has fallen by 35%, Stellar has fallen by 29%, Avalanche has fallen by 39%, Polkadot has fallen by 32% and Terra USD is down by 27% .

All in all, the global crypto market has lost about $ 830 billion in market capitalization within six weeks. All this leaves an unanswered question – where does the money go and how many more losses can investors take?

Unfortunately, the problems surrounding the crash of cryptocurrencies make it difficult to predict the correct answer to this valid question. However, here is a bitter truth, there are greater chances for a further fall than there are for a recovery in the crypto market. To know why, here are some issues for krypton as well as the global stock market. It is particularly difficult to predict when these problems may end in order to reverse the carnage of cryptocurrencies.

Interest rate increases

Ever since the United States raised interest rates to hold back its highest inflation levels ever in four decades, global markets have gone crazy. The RBI recently raised interest rates in India as well, with the rupee heading into a free fall. The sale of shares around the world has also hit the crypto market quite hard.

Russia – Ukraine war

The war in Ukraine refuses to show any signs of slowing down. At the same time, the prices of important goods such as wheat exported by Ukraine are expected to rise as the country struggles for its survival. The supply chain is also back in the headlines due to the war. Without anyone knowing when the war may end, it does not look bright for global growth in the wake of the ebb and flow of the pandemic, making it difficult for cryptocurrencies to find growth paths.

Destruction of UST stablecoin

An important reason for the current sales in the crypto market has to do with a stable coin – TerraUSD (UST). Stablecoins are pegged to fiat currencies and should be more resilient compared to volatile cryptocurrencies.

UST was recently “depegged” from the US dollar and instead of maintaining its value of $ 1 on par with the US dollar to which it is pegged, stablecoin quotes a price of $ 0.45 – a huge decrease of 55 percent. This has had a direct effect on Terra Luna (LUNA) with which it is linked to fall as much as 97% from its record level of $ 118 which was seen in April to only $ 0.37. The UST crisis has swept through the crypto industry and sent down the prices of almost all well-known coins by a considerable amount.

What should investors do? It may be the hardest thing to do, but the best solution is to simply gather your assets. Do not sell them in a panic, no matter how gloomy the picture may be. Remember that the value of cryptocurrencies has increased many times during the bull rally and there is no reason why it can not happen again.

The world needs to see some positive signs from somewhere to be comfortable investing and raising the value of cryptocurrencies. The growing use of cryptocurrencies and blockchain technology along with the phenomenal increase in NFT (cricketer Rohit Sharma announced his personal decline in NFT on the day cryptocurrencies fell worldwide) also makes it a compelling case to simply sit tight and wait for the tide should turn.

For those who want to invest in cryptocurrencies, my suggestion would be to wait a while until the bottom is closer. You do not want to invest in a new technology and see its value go down even further. Remember to keep a watchful eye on positive signals and follow global news and stock markets with an interest in also measuring the mood in the crypto world. Back to the question of where the goat stays, the simple (and complex) answer is that it does not, not in the near future at least.

Arijit Mukherjee, founder and CEO of Yunometa

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