Cryptocurrencies, an hour of disillusionment

Cryptocurrencies, an hour of disillusionment

The fall was steep and bitcoin, the first cryptocurrency, failed to regain its momentum. While its price peaked at an all-time high of $ 69,000 (€ 64,425) last November, bitcoin has since disintegrated before collapsing in early May, losing more than half its value in six months. It was displayed below $ 30,000 on Tuesday, May 24. All cryptocurrencies have failed due to bitcoin, which alone weighs only a small half of the market.

The decision of the US Federal Reserve to raise its key rates in an effort to curb the high inflation that has hit the United States largely explains this market decline. The sudden end of easy money, caused by this tightening of monetary policy, also unscrewed technology stocks listed on the United States stock exchange. “There is now a correlation between cryptocurrencies and risky assets, which is new”says Alexandre Stachchenko, director of blockchain and cryptocurrencies at KPMG France.

Institutional investors

Bitcoin was built with the ambition not to be independent of states or central banks and was for some time perceived as a tool to protect against inflation. Markets are now finding that this is ultimately influenced by central bank decisions. “Over the last two years, institutional investors have become mostly in the cryptocurrency market at the expense of individuals, as can be seen when monitoring Coinbase transaction volumes, notes Alexander Stachchenko. However, institutions adopt the same behavior for cryptocurrencies as in financial markets. When central banks raise interest rates, they will look for less risky assets. » A cautionary movement reinforced by the highly uncertain geopolitical context associated with the war in Ukraine and the detention in China, which worries investors.

Also read: Article reserved for our subscribers Bitcoin, ethereum or tether… For the youngest, easy money and disillusionment in the country of cryptocurrencies

The fall of the cryptocurrencies was further exacerbated by another disappointment: the finding that some “stable coins”, cryptocurrencies that were supposed to guarantee parity with the dollar had only a stable name. The makers of stablecoin terra (UST) claimed to be able to fix its price to the dollar without using dollar reserves, like most of its competitors, but used an algorithm that automatically performed complex arbitrage with another cryptocurrency issued by the founders. , moon.

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