Graphical representation of cryptocurrency Bitcoin, which had record losses after retreating for seven straight weeks (Credit: Pixabay)
Last Sunday (15) sealed a historic record for the Bitcoin cryptocurrency: it was the first time that the coin suffered seven straight weeks of losses.
Despite having reached some stability in the last two days, returning to operation above US$ 30 thousand, many investors are still cautious and even betting on even greater drops in the coming months.
Bitcoin drops to $30K. Understand the reason for this drop and what it means
TerraUSD stablecoin announces turnaround plan and seeks funding
The drop can be explained by the fact that cryptocurrencies are risky assets and their prices tend to amplify the mood swings of investors. The fall of cryptocurrencies would be following movements of other more traditional assets.
For Florêncio Ponte Cabral Jr., CEO of Virtus Automation & AI, a startup accelerated by InovAtiva Brasil, the currencies follow the market trend, but some factors generated the great instability of the currency, the main factor being the Terra blockchain, which has as its Luna coin.
The collapse of the cryptocurrency caused losses that reach BRL 1 trillion e. according to him, the problem was that the cryptocurrency was operated as a “grand pyramid scheme”.
“We don’t know to what extent the algorithm’s systemic risk was also. When the currency crashed, the algorithm caused the system to collapse. People, afraid, started to withdraw the currency, which provoked a systemic fear”, says Cabral Jr.. He believes, however, that good investors have already realized that this is the time to buy.
Will Clemente, an analyst at Blockware, says that the asset has probably already reached its minimum value, while researchers at the Huobi Research Institute remain more pessimistic and say that “the bottom is still to come”, they informed the website Olhar Digital.
The recommendation for investors is to postpone the purchase, according to an HRI report released last week. Some experts make even more negative predictions: Founder and former Bitmex CEO Arthur Hayes wrote on his blog that he bets the coin will hit $20,000 later this year.
This level was surpassed by the cryptocurrency in late 2020, skyrocketing and reaching a peak close to $70,000 in November 2021, according to Bitstamp data.
In total, losses in the cryptocurrency market already amount to $1.2 trillion, according to data from CoinMarketCap.
Earth USD and Luna
One of the most significant developments was the so-called collapse of stablecoins, which are basically digital tokens pegged to the value of traditional assets, such as the dollar. Cryptocurrency Luna, for example, went from $87 to $0.38 in a period of less than 24 hours.
Luna is associated with another asset, called TerraUSD, whose value is formed by algorithms, but Luna floats freely according to the law of supply and demand.
Because of this, investors, who could normally exchange a dollar for a Luna, ended up unable to liquidate, putting themselves in a difficult position.
The difficulty in “reviving” the currency and making it profitable again has raised concerns among those who invest in cryptocurrencies, making the market situation even more complicated. The plan by South Korean Do Kwon, founder of the company behind the cryptocurrency, to seek parity with the dollar again via reserves, instead of relying on an algorithm ended up not encouraging investors, according to the Bitcoin Portal.
#Bitcoin #record #losses #retreating #straight #weeks