What’s Behind The Recent Plummet In Crypto?

28 April 2022 Crypto

Crypto Updates: Before bitcoin trading as CFDs, brush up on the recent story of cryptos including Cardano and the latest on crypto crash

Cryptic Moves in Crypto

During Bitcoin’s recent journey down from its high point in November to below $36,000 in January, we learned an interesting observation: crypto currencies had begun to behave like regular equities, as opposed to safe havens. The US Federal Reserve’s plans to tighten monetary policy sent Bitcoin into a dip along with other risk assets. “Bitcoin is being battered by a wave of risk-off sentiment. For further cues, keep an eye on traditional markets,” declared Antoni Trenchev of Nexo in the last week of January. Also during this time the crypto aggregate market lost a whopping $1 trillion, with Bitcoin itself losing more than $600 billion in market value. Strange, considering the gains certain key cryptos made that month.

Mid-January actually saw a surge in Bitcoin, Ether, and Solana of about 5%, and it was during this time that Cardano leapfrogged the rest to gain 30% in only a week. Behind this was the news that the Cardano metaverse was underway and that its blockchain was going to host a decentralized exchange (DEX). Even so, Cardano’s token ADA was still as much as 50% below the level it was in September. With about ten days left in the month, Bitcoin sunk by another 12%, the reason being that when “People start to… look for something that’s a little more solid, they’re gonna move away from crypto”, in the opinion of Kara Murphy of Kestra Investment Management. In this mood, bitcoin trading as CFDs was quite the volatile market. Let’s take a closer look at what happened by mid-April.

Bitcoin

As Russian troops invaded Ukraine on February 24th, the resulting tensions had pushed Bitcoin down to its lowest in two weeks, touching $36,372. Ether, for its part, sunk by 3%, and XRP by 6.7%. The response of the world’s biggest crypto to the political situation confirmed to analysts that it did not belong to the same category as gold, the safe haven. Bitcoin was “Notably underperforming its arch-enemy, gold”, said John Roque of 22V Research. 

In the third week of March, the Fed had raised interest rates and the battle situation had slightly ebbed, but Bitcoin took a weekly gain of 5% and settled at $40,700. As to the possibility of further gains, the feeling among many analysts followed that of GlobalBlock’s Marcus Sotirou that “For 2022, I can’t expect an aggressive uptick in prices, because of the macro conditions”. As things turned out, Bitcoin did manage to touch $48,000 before the end of March.

In April, along with Bitcoin’s own price drop there was also a notable drop in Google searches for the word “Bitcoin”, and the crypto’s user base was showing signs of growth stagnation. On April 18th, Bitcoin dropped 4.2% to find itself at $38,580, the lowest in a month. More broadly than this, the world crypto market took another big hit, finding itself shaved of a considerable 4% of its value in a single day. Ether was down by 5.3% along with the altcoins.

Cardano

Cardano’s January surge had to do with more than the news of its latest attractions. Blockchain users pay fees – known as gas fees – for the computing power used by their transactions. Compare the gas fees paid by users of Ether, Solana and Bitcoin in a single week in the middle of January – $44 million – to the amounts paid by Cardano users at $75,400. “One could quite easily argue that the NFT market has found a gas-light way to transact, and that is the Cardano blockchain”, suggested Hayden Hughes of Alpha Impact. 

In the second week of April, when Bitcoin had sunk by 7.7%, and Ether by 9.5%, Cardano was down even more, by 11%. The dynamics behind this challenging week in crypto had to do with the bad week in US tech stocks, with which cryptos often move in tandem. One reason Cardano believers stay encouraged is that the blockchain has been working on ways to make itself useful, not only for payments, but also voting procedures and managing national currencies. “You could run a nation-state on this type of infrastructure”, insists Cardano boss Charles Hoskinson. Others believe Cardano doesn’t have what it takes to endure into future. “ADA’s critics say there’s too much talk and not enough action”, explains Antoni Trenchev of Nexo.

Further Down the Line

Needless to say, opinions vary about where the price of Bitcoin trading is going. “We continue to believe that it will get to the $30,000 level”, said John Roque in the third week of April. At this time, however, crypto trading volumes on platforms like Coinbase and Kraken were a massive 60% lower than in May 2021. Whether or not bitcoin will see a recovery in the next few months is uncertain, but one thing seems pretty sure: volatility. When it comes to crypto, cash and even certain commodities like wheat and oil, the ongoing conflict between Russia and Ukraine—which shows little sign of stopping anytime soon—may see the markets parked in uncertainty, giving rise to both opportunities and risks for CFD traders. 

 
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