Bitcoin lost its gains in recent months in May and its price on Tuesday dropped below $30,000as part of a market trend away from risk assets due to the uncertainty of the war in Ukraine.
(Read: In free fall: bitcoin is below 30,000 dollars).
With the fall of this asset, the other cryptocurrencies in the market replicated the fall. The market as a whole was valued at about $1.5 trillion compared to a level of $3 trillion invested at the height of this sector’s heyday, according to data from Coingecko, which records more than 13,000 cryptocurrencies.
Bitcoin depends on different aspects; the most important: its underlying technology. In this sense, it is tied to use in different savings, investment and payment method scenarios, according to Alejandro Beltrán, spokesperson for Buda.com, a page that develops and operates cryptocurrency markets.
In this sense, it is an asset. with high volatility in the short term. In addition, of a risk profile since it has a variable income. Its value is influenced by the regulations of a country that have a direct effect on its price. Also the adoption of the trading system where it operates and network updates, which require consensus processes that allow the community to validate if it is convenient, according to the expert.
(Also: How is the discussion about the regulation of crypto assets in Colombia going).
Because of its high risk, it has begun to be part of the traditional markets. For example, through reserves held by governments and large companies. Beltrán points out that this has made the joints impact on its price.
“For example, uncertainty about inflation and rising interest rates. This discourages the market, encourages savings and contracts demand, mainly on risk assets.“, Explain.
Consequently, the risk markets begin to contract. Even the stock market begins to show falls. Which leads to a flight of capital, the dollar strengthens and investors take shelter in the safest assetsBeltran says.
Among the risks that impact him, Beltrán highlights three: buying and lowering the risk, since it is governed by a supply and demand market. This implies that there is no fixed return.
In turn, buying bitcoins and not keeping them well. Being a self-management mechanism, it is necessary to have good passwords and backups, authentication and security validation. Finally, buy from intermediaries who offer false returns.
Now, the expert also clarifies that bitcoin cycles in the face of uncertainty have a short-term effect but that, generally, they have significant growth afterwards. “These falls usually represent great opportunities“, He says.
(Read: ‘Crypto winter’: what it is and how close the market is to getting there.)
Finally, consider that the market is not close to a crypto winter, where the price stagnates. For now, cryptocurrencies are in a transition period.
On the last day, bitcoin moderated its fall when it lost almost 6%, influenced by the collapse of the TerraUSD cryptocurrency, theoretically linked to the dollar, and at noon yields 3.31%, to $27,461according to market data consulted by Efe.
The cryptocurrency fell below $30,000 yesterday, its lowest level since November 2020, after stablecoin TerraUSD lost its peg to the dollar and plunged to as low as 23 cents. The global markets strategist of the multi-asset investment platform eToro, Ben Laidler, considers that the fall that bitcoin has experienced since the beginning of the year was “significantly” worsened by the TerraUSD Contagion.
Unlike other stablecoins, TerraUSD is not backed by other assets, but instead maintained its parity with the dollar through a complex algorithm linked to Luna, an unbacked cryptocurrency.
With information from EFE*