The crypto economy is undergoing one of the most stressful days in its short history, with a collapse, threatening to drag Bitcoin and altcoins to 2019 slumps in the upcoming period.
Despite the Federal Reserve raising interest rates by 0.75 basis points this week, the crypto market experienced a little respite, with digital currencies regaining some of their value. Analysts believe, however, that the devastation will not be repaired very soon.
“In stocks and crypto, we will see entities which were powered by cheap, easy cash but did not really have actual business potential collapse,” said billionaire crypto investor Mark Cuban in a statement to Fortune magazine.
The Shark Tank producer and Dallas Mavericks owner linked the current status of the industry to Warren Buffett’s statement from a few years ago: “When the tide goes out, you get to see who is swimming nude.” Cuban, like other watchers and analysts, feels that hundreds of Bitcoin projects are on the verge of oblivion. Risky assets, which have historically piqued the interest of whales and regular investors, were the first to feel the consequences of central banks’ global pivot.
The crypto market is seeing one of its biggest historical drops as the period of easy money appears to be coming to an end, especially due to pandemic stimulus checks that aided greatly in inflating digital currencies and their linked stocks.
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The Effects of Federal Reserve Announcements on Crypto
Fears that the Fed and other global issuers may trigger a new recession by pursuing harsh monetary policy (e.g., rate hikes and stimulus withdrawals) to combat inflation have sparked an impending crisis.
Cryptocurrencies have suffered massive losses in recent weeks, led by Bitcoin and Ethereum. The collapse of the Terra Luna ecosystem, and the consequent domino-effect collapse of enterprises in the crypto world, intensified the crypto meltdown, raising severe alarms of worry among regulators and frightened investors.
Last week, crypto financing behemoth Celsius Network cut off access to withdrawals on its platform, raising investor concerns about the future of other companies affected by the issue.
Big trading companies including Crypto.com, BlockFi, and Coinbase (NASDAQ: COIN) reportedly announced massive layoffs, wage freezes, and spending cuts in order to hopefully endure the coming crypto winter, which nobody has predicted. Binance is an outlier, announcing the addition of 2,000 job hires.
According to reports, the crypto fund ‘Three Arrows Capital’ is on the verge of going bankrupt after paying out $400 million to clients. Indeed, shares of companies that trade cryptocurrencies or have exposure to digital assets have been plummeting in recent months.
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Well Beyond Crypto Crash: Mark Cuban’s Predictions
As a result of the current crisis, Cuban expects that many firms and cryptocurrencies will collapse and vanish.
Regardless of the current hurdles in the economy, Cuban firmly believes in the potential of cryptocurrencies. After the digital asset crisis, he predicts, a more innovative and effective economy will evolve.
“Whether stocks, crypto, or any other business, disruptive applications and technologies deployed during such bearish market will always find a niche and flourish,” the tycoon remarked.
Cryptocurrencies, according to Cuban, are correlated to the Nasdaq, which explains why technology stocks and BTC have been trending in the same direction. The link between the US stock index and the major cryptocurrency appears to have peaked recently.
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Well, it’s all matter of time, and we have to keep our patience high for this ongoing recession and watch the crypto market carefully to make the most out of it in the upcoming times.
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