Cryptocurrencies are becoming increasingly dangerous

Cryptocurrencies are becoming increasingly dangerous

The cryptocurrency market is in a bad patch and needs more than 2 years to boom again. Additionally, the role of cryptocurrencies threatens global financial stability.

Bitcoin price fell nearly 8% during a selloff on Feb. 17. After a brief recovery period, the price of the world’s largest cryptocurrency remains low below $40,000.

Bitcoin’s movements continued to dominate the market, leading to a wave of declines of a number of other codes such as Ethereum, Polkadot, Avalanche… The coin’s capitalization shrank 746 billion dollarsfell to its lowest level since early August 2021.

CNBC quoted Du Jun, co-founder of the Huobi exchange, as saying that Bitcoin may not enter an uptrend until late 2024 or early 2025.

Hard time

Usually, the uptrend phase of the cryptocurrency market is closely related to the reduction in Bitcoin mining reward (halving), which occurs approximately every 4 years.

Bitcoin mining is a concept that describes the use of specialized computers to validate transactions on the blockchain. The system rewards miners in bitcoin for each task completed by the computer.

The last Bitcoin Halving took place in May 2020. In 2021, bitcoin price peaked continuously, almost hitting a record 69,000 won USD. The price of the digital currency also broke out in 2017 when it went through the halving in 2016.

However, after the peak, the price of bitcoin usually falls. Compared to the peak since last November, Bitcoin has lost more than 40% of its value.

“If this cycle continues, we are now in the early stages of a bear market (bear market). According to this cycle, we cannot see the next Bitcoin boom until late 2024 and early 2025,” Du said.

According to the Huobi co-founder, market trends also include many other factors such as geopolitical issues, war or epidemics, especially the Covid-19 pandemic.

The recent decline in a number of cryptocurrencies has some investors concerned that a “crypto winter” may be imminent, implying an extended bearish phase and sideways movement.

Threats to financial stability

2021 is a successful year for cryptocurrencies. Besides the value, the market has also witnessed the flourishing of many new niches in the field of digital assets such as NFT, GameFi, Metaverse… This is also the reason why companies and organizations are investing in R&D efforts in this industry.

Recently, venture capital organization Sequoia announced that it was expanding its crypto business through a $500600 million dollars.

But, according to CNNthe latest report from the Financial Stability Board (FSB), an international body made up of regulators from 24 countries and jurisdictions, says that a boom in the cryptocurrency market could quickly become a threat to global financial stability.

“Large banks and financial institutions are gaining more and more access to digital assets. The fact that the market maintains its growth trajectory, including its size and interconnectedness, will have an impact on global financial stability,” the FSB said.

In 2021, the electronic assets market has a time of reaching 2,600 billion dollars. Compared to the size of the global stock market, this is estimated 120,000 won billion dollarsthe above figure is still quite modest.

However, the FSB warned that the involvement of large investors in the cryptocurrency market could cause a number of unexpected events. The agency even compared it to the bursting of the real estate bubble that triggered the financial crisis in 2008.

Faced with this situation, many regulators have also started taking legal action to tighten cryptocurrency trading activities.

In early February, the US Congress held a hearing on stablecoin regulation. These are electronic assets whose value is linked to other currencies or commodities.

Next week, US President Joe Biden is expected to issue an executive order that will guide authorities to step up regulation of cryptocurrencies and unveil a government-wide strategy to regulate crypto assets.

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