Is the Crypto Crash Endangering the Financial System?

For the very first time in ten months, Bitcoin fell below $30,000 per coin. In all, cryptocurrencies lost about $800 billion in market value in the preceding month, as investors remained concerned about the Fed’s strict monetary policies.

Is the Crypto Crash Endangering the Financial System?

Bitcoin momentarily went below $30,000 for the first price in ten months on Tuesday, while the whole industry altogether have lost about $800 billion in market value in the last month, according to statistics site CoinMarketCap, as investors worry about tightening monetary policy. Crypto is a considerably larger market than it was during the Fed’s previous tightening cycle, which began in 2016, prompting worries about its interconnectedness with the rest of the financial system.

Bitcoin achieved an all-time peak of over $68,000 in November, bringing the crypto market worth to $3 trillion. On Tuesday, the total was $1.51 trillion. Bitcoin accounts for about $600 billion of that market price, trailed by Ethereum, which has a market cap of $285 billion. Despite its tremendous rise, the industry remains relatively modest. Digital tokens began as a retail phenomena; but, institutional interest from firms, exchanges, hedge funds, mutual funds, and banks is rapidly expanding.

The value of US equities markets, for example, is $49 trillion, while the outstanding value of US fixed income markets is $52.9 trillion as of the end of 2021, according to the Securities Industry and Financial Markets Association.

The Acting Comptroller of the Currency cautioned that unhedged crypto exposures and crypto derivatives might cause banks to fall since they are working with little historical pricing data back in March. Regulators are divided over how dangerous a cryptocurrency crisis would be to the financial sector.

Each time there is a news claiming billions of dollars in virtual currencies, they aren’t real money; there’s no genuine market liquidity. However, the market recognized this scarcely supported currency as being for a dollar because traders believed it would allow them to profit for a short period of time.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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Jai Hamid

CoinCu News