Bitcoin hit its lowest level since December 2020, reaching $25,000, down nearly 20% in value over the past five trading days and down 45% year-to-date. In the last eight sessions alone, the loss was $13,000.
The scenario is an example of the volatility of cryptocurrencies, which is nothing new for investors. Late last year, right after the most critical phase of the pandemic, there was a flurry of government stimulus that filled the money market — including for risk assets, that is, those with greater volatility.
In November 2021, for example, bitcoin was at $70,000, attracting even more investors.
What we see now is the opposite movement: central banks around the world are taking liquidity out of the market to contain the high levels of inflation. As interest rates rise, investors are becoming more selective and shifting from risky to safe assets — such as rising fixed-income securities.
According to experts consulted, such as Safiri Felix, advisor to the ABCripto association, the expectation is that bitcoin will maintain volatility while the market is in this moment of great uncertainty, caused by the combo of lockdowns in China, record inflations around the world, driven by the War. in Ukraine, and subsequent recession fears.
In general, the view is that we are in a “bear market” moment, that is, when markets have dropped more than 20% since their peak. As long as they don’t grow again — which is unlikely to happen in 2022, seen as a year of stock market decline — volatility will continue.
stablecoins
Also called stablecoins, stablecoins are tokens that try to follow the stability of a certain traditional asset to reduce risk. TerraUSD, for example, targets 1-to-1 parity with the US dollar.
Today, TerraUSD has dropped to 0.39 cents on the dollar.
With the fall, investors are questioning the role of stablecoins, previously seen as the great novelty of the cryptocurrency market.
Mistrust spreads to all risky assets, which has also brought down the market.
Source: CNN Brasil
I am Sophia william, author of World Stock Market. I have a degree in journalism from the University of Missouri and I have worked as a reporter for several news websites. I have a passion for writing and informing people about the latest news and events happening in the world. I strive to be accurate and unbiased in my reporting, and I hope to provide readers with valuable information that they can use to make informed decisions.
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