On the morning of June 14, the bitcoin rate fell to a minimum since December 2020 of $20.8 thousand. Over the past day, it has fallen in price by 7%, and by 36% over the week.
The decline in the digital asset market accelerated on June 13 when international crypto lending company Celsius announced a ban on customer withdrawals, citing “extreme market conditions.” After that, the CEL token fell in price by 50%.
Experts RBC-Crypto called the main factors that led to the last collapse of the cryptocurrency market.
Inflation and the impact of the stock market
The main reason for the fall of the crypto market is the same as the fall of the stock market, namely, inflation in the United States that accelerated to a 40-year high, the May figures of which were published last Friday, says Roman Nekrasov, co-founder of the ENCRY Foundation.
According to the expert, both the crypto market and the stock market immediately reacted with a fall to the publication of the data. The specialist explained that high inflation indicates the future course of the US Federal Reserve to raise the key rate.
“The increase in the rate leads to a decrease in the availability of loans, that is, to a decrease in consumer activity. This entails a slowdown in economic growth,” the expert says. He noted that the crypto market, with its strong dependence on the momentary emotions of investors, accelerated the fall over the weekend, and on Monday went to the peak.
At the same time, a rate hike means higher yields on instruments such as Treasury bonds, prompting many investors to reconsider the proportion of high-risk assets in their portfolios, according to Nekrasov.
He believes that investors are moving away from high-yielding but high-risk assets such as stocks or cryptocurrencies in favor of low-risk assets, whose returns are now higher than they used to be.
Due to rising inflation in the US and further forecasts, the stock market has changed, agreed Nikita Zuborev, senior analyst at BestChange.ru. The specialist noted the increase in the rate on government bonds and the increased interest in the commodity segment.
The current drop is due to the correlation between the traditional and cryptocurrency markets, added a representative of the exmo.me crypto exchange. The expert said that in the first half of the year, the correlation of bitcoin with American technology stocks reached a record.
The specialist clarified that the 40-day correlation coefficient between cryptocurrency and the Nasdaq 100 technology index reached almost 0.66, which is the highest since 2010, according to Bloomberg. A similar correlation with the S&P 500 also hit a record.
“More and more institutional investors are diversifying their portfolio with cryptocurrencies. In the event of a lack of liquidity, in order to prevent the liquidation of large positions, they begin to sell bitcoin, ”an exmo.me representative is sure.
The situation in the crypto market is exacerbated by the fear of investors associated with the DeFi sector and the consequences of the collapse of Luna/UST. Market participants are reasonably expecting further cascading crashes of various crypto projects and are trying to secure their savings by closing positions in digital assets, says Roman Nekrasov, co-founder of the ENCRY Foundation.
BestChange.ru Senior Analyst Nikita Zuborev agreed with him, pointing out that there are a lot of rumors on the crypto market today, inciting fears and concerns about what happened with UST. The expert believes that investors, without understanding the details, try on the same scenario for other stablecoins, which only “adds fuel to the fire.”
All of the above factors are only part of the overall picture, Zuborev added. The analyst admitted that the situation in the stock market, “FUD” against the backdrop of distrust in stablecoins and self-sustaining panic from falling prices are only “catalysts” of what is happening.
The expert called the natural cycles of the market the true reason for the start of a new fall. He explained that such behavior was quite predictable, although most forecasts did not take into account the possibility of such a sharp continuation of the “bearish trend”.
“Today, bitcoin is near the mark that we expected to see by the fall and considered the peak of a possible fall. It is difficult to assess the prospects of the market in such turbulent conditions, but we expect a relative stabilization of the situation in the coming weeks,” Zuborev admitted.
The analyst suggested that the market most likely reached the “bottom” today, but the situation may develop according to more negative scenarios: this can only be assessed by analyzing the behavior of the market in the next few weeks.
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