Investors leaves crypto as rates rise and Bitcoin falls

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Bitcoin’s value has plummeted to a year-to-date low due to rising interest rates and weak economic development.

The price of Bitcoin fell below $33,000 for the first time since July of last year. Ethereum, meanwhile, fell to a level not seen since February of last year, trading below $2,390. The crypto markets as a whole, with a total market value of $1.6 trillion, echoed this mood as well.

Crypto platform Stack Funds’ chief operating officer, Matt Dibb, said the sell-off was partly caused by the crypto market’s historically poor liquidity during the weekends.

Cryptocurrency is still a “risk asset,” according to him, and “like the Nasdaq, most cryptocurrencies are being hammered.”

Bitcoin’s 27 percent plunge this year is more in line with the tech-heavy Nasdaq’s 22 percent drop than the world bond and share losses of 10 percent.

The idea that bitcoin may be used as a hedge against inflation has been weakened as connections between bitcoin and risky investments like tech stocks have reached historic highs this year.

Despite the Federal Reserve’s decision to boost interest rates in response to growing inflation, growth is still constrained by supply chain disruptions caused by the epidemic and Russia’s invasion of Ukraine.

In addition to dwindling liquidity and sagging stock markets, these issues have harmed the near-term prognosis for more speculative assets, like crypto.

As CEO of algorithm-based crypto investing platform Mudrex Edul Patel said, “the negative trend is expected to persist over the next several days.”

Stablecoin Terra is slipping in value

Terra USD (UST), an algorithmic stablecoin, suddenly lost its peg to the dollar this weekend, which had a direct impact on the market’s downward trend. The sliding may have been caused by Terraform Labs’ use of a unique method to keep the peg in place.

Bitcoin markets might possibly be affected by volatility in the stablecoin, which is backed by a reserve of $10 billion worth of the cryptocurrency. This weekend, stablecoin LUNA saw its price fall nearly 25%, despite the stablecoin’s recovery.

Also Read: Top crypto analyst explains why decentralised finance will completely replace the traditional financial system

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