NFT

Panic in the crypto market

June 13 was dubbed “bloody Monday” because of the panic in the cryptocurrency market: another stablecoin lost its peg to the US dollar, the largest crypto exchange in terms of turnover froze withdrawal to Bitcoin, and a number of projects are threatened with bankruptcy. However, the real troubles are still ahead.

From the November highs, Bitcoin has already decreased by 60%, and Ethereum – by 70%. Altcoins are traditionally harder to bear bearish moods – this is true for both the preferences of crypto traders and institutional investors. Since the beginning of the year, investments in Ethereum crypto funds have shown a decrease of $387 million, while the inflow to Bitcoin funds is still positive with a result of $451 million.

Due to the panic in the crypto market, a number of projects faced a large outflow of investments, and crypto exchanges recorded an increase in activity. On June 12, the Celsius project announced the suspension of withdrawals, and on June 13, Binance froze the withdrawal of Bitcoin. These events only added fuel to the fire, which is why the CEL token lost 50% in a day, and Bitcoin – 18%. Later, the head of Binance announced the elimination of the error and the resumption of transactions.

The USDD stablecoin of the Tron network is a cast of the infamous UST Terra project.

USDD has a small capitalization, since it was released in early May. However, it has already faced a liquidity crisis and the loss of its peg to the US dollar. On the KuCoin crypto exchange, the exchange rate fell to 91 cents and has not yet recovered, which threatens the market with the loss of another algorithmic stablecoin.

The drop in the capitalization of the crypto market is a stress test that will weed out weak companies and short-term profit-oriented projects. Public mining companies have already moved from accumulating to selling Bitcoin due to a shortage of funds to cover operating expenses. And in the near future, a series of mergers and acquisitions in this sector is expected.

Things are no better with the largest public hodler – MicroStrategy (NASDAQ:MSTR). For three years, the company has been buying Bitcoin following an increase in value, starting from $12 thousand. Now the company’s assets amount to 130 thousand BTC, and the unrealized loss is $ 1 billion. The last purchases were made on credit, which is why Microstrategy will have to increase the deposit in the bank.

And yet, the fall of the crypto market was not news for companies. The upcoming tightening of the monetary policy of the US Federal Reserve became known at the end of last year, when Jerome Powell stopped considering inflation a “transient” problem. Following the regulator’s reversal, all risky assets, including the cryptocurrency and stock markets, fell down.

Do not forget that since 2020, the main investment force in the crypto market is institutional investors (companies with investments of $ 1 million or more), most of which are American residents. In particular, this explains such a strong influence of the Fed on the crypto market.

The next meeting of the Federal Reserve will be held tomorrow, according to the results of which the rate will be raised again. Most experts expect a rise of 0.5%, but the inflation that has grown to 8.6% can prompt the regulator to take bolder steps. In this case, the pressure on Bitcoin will increase.