The crypto bleeding continues.
Bitcoin prices have lost about a third of their value in the past week, hitting lows in the over $20,000s, but have recovered to $22,664 at the time of writing. Altcoins are also bleeding. Ethereum ETH +1.9% down 31% in price, CardanoADA +2.1% down 16%, SolanaSOL +2.1% down almost 10%, XRPXRP +2.6%, BNBBNB +2, 8%, Dogecoin, Luna from Terra down 15 %. 24%, 30%, 23%.
Is it close to the ground?
Although hard to spot in murky waters, Shark Tank star Kevin O’Leary, who committed murder at the peak of the dot-com bubble, says he doesn’t think we’ve hit bottom yet. “You don’t bottom out until you have activity,” O’Leary told CoinDesk this week.
What kind of activity are we talking about, Kevin? Before getting him to answer the question, let’s take a closer look at what has plunged the crypto market into the abyss.
While we have witnessed many of these “events”, including the collapse of Terra and the implosion of Celsius, the largest cryptocurrency lender, they are an effect, not a cause of the broader risk-off sentiment in risk assets.
“Who is to blame for this flight? Many analysts are pegging it to stablecoins. However, the opposite may be the case. The crypto market has been on a downward trajectory since May 4th, which is exactly the same as the Fed raising interest rates by half a point. Unanimous. After that, the stock market crashed and the tech-heavy Nasdaq lost 13% of its market cap. That makes sense. Cryptocurrencies are highly correlated with risk assets, especially tech stocks. And because they have higher betas , they actually act as amplifiers for stock movements.”
Some analysts compared the sell-off to the tragic burst of 2018’s first major cryptocurrency bubble. Bitcoin lost 80% of its value in a year after it went parabolic and broke above $19,000.
But unlike today’s emotion-driven implosion, this crash was largely the result of a series of panic events:
- On Jan. 12, rumors began to circulate that South Korea was preparing to ban cryptocurrency exchanges.
- Two weeks later, Coincheck, Japan’s largest cryptocurrency exchange, was hacked and $530 million worth of cryptocurrency was stolen.
- Then, in early March, Binance lost control of the private keys that wreaked havoc on the largest cryptocurrency exchange.
- Some analysts compared the sell-off to the tragic burst of 2018’s first major cryptocurrency bubble. Bitcoin lost 80% of its value in a year after it went parabolic and broke above $19,000.
But unlike today’s emotion-driven implosion, this crash was largely the result of a series of panic events:
On Jan. 12, rumors began to circulate that South Korea was preparing to ban cryptocurrency exchanges.
Two weeks later, Coincheck, Japan’s largest cryptocurrency exchange, was hacked and $530 million worth of cryptocurrency was stolen.
Then, in early March, Binance lost control of the private keys that wreaked havoc on the largest cryptocurrency exchange.
To do this, we need to sort out some macroeconomic headwinds, including the worst inflation in 40 years, Fed tightening, and the possible impact of the Ukraine-Russia war.
The good news is that this cryptographic procedure is cleaning up the market for overvalued assets. The multibillion-dollar liquidation is urging lawmakers to create a clear regulatory framework for digital assets — which could improve their institutional acceptance in the long run.
Bad news: O’Leary doesn’t think the purge is over because we haven’t actually seen the chain of panic events that he thinks define the bottom. He believes that more crypto assets are trending towards zero.
“The panic event defines the low point,” O’Leary said. “In the crypto world, we need someone to go to zero” before crypto can be leaner and meaner.
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