Two weeks ago general market correction started. Both equities and the crypto market were affected. Major reason behind this correction was FED`s another increase of interest rates by 50 basis points, as well as their narrative related to further monetary tightening. However, the question that still stands is if the latest market moves were only the beginning of the awaited bear market and where the bottom of it currently stands? Analysts are in agreement that this year is going to be a very challenging one in terms of potential profitability, let alone inflation hedging. On the other side, there are economists who are waiting for a glimpse of a signal that inflation is slowing down. This signal will indicate that monetary authorities of developed countries will stop with liquidity squeeze from the market, which would be time for dip buyers to enter the scene.
Current geopolitical tensions are not helping the markets as they are impacting increase in price of food and derivatives, major contributors for increasing inflation all around the world. It should be added that distribution channels are still very fragile, especially with ongoing lockdowns in China and its major port in Shanghai. Recession is currently the most used word among financial professionals in the EU and US.
Additional weight on the crypto market downturn was added by the crash of Terra stablecoins. It seems that algorithmic pegs are not well suited for significant market moves, so the coin LUNA reached $0 and was withdrawn from trading. This also caused several other stablecoins on the market to lose their USD $1 peg, as in the case of USDT. On the other hand, this case was used by the policy makers on latest G7 meeting to call for stricter regulation of stablecoin market and also call for anti-money laundering laws to be strictly followed by companies issuing stablecoins, as well as that they should regularly provide information regarding amount of funds actually backing $1 peg.
Negative macroeconomic prognosis and current bearish trend didn’t have much impact on current Bitcoin and crypto market long term investors. As it has been officially confirmed by representatives of MicroStrategy, one of the largest holders of BTC, this company does not have any intention to sell its Bitcoin holdings at this moment. On the other side, Coinbase experienced a significant drop in share price since the beginning of this year, considering its weak profitability. The company noted that they will stop new hiring during the second quarter, in order to consolidate its earnings. During the World Economic Forum in Davos, held this week, mostly present companies were the ones in crypto technology. In the Promenade, part of the meeting where companies and governments have a chance to meet, most dominating companies were from the field of crypto business as well as Meta and Saleforce.
Crypto market
Funds outflow from the crypto market continued strongly during the previous two weeks. Since the beginning of this year, a total $1 billion has been wiped out from the market. Current total market capitalization stands around $1.2 trillion while daily trading volumes are relatively decreased. Bitcoin participation continues to be dominant. During the last two weeks, BTC even managed to increase its participation in total crypto market cap to 45% from 41% it was holding before the latest downturn. Highest drop in market participation was Tether, which dropped to 12% from 15% previously. Highest impact on this drop actually is coming from negative market sentiment due to LUNA collapse.
Crypto futures market was also traded significantly lower, due to the latest drop in spot prices. What is evident from current market prices, is that investors don't share too much optimism for BTC and ETH prices as of the end of this year. As per latest available data, BTC futures maturing as of the end of this year are traded modestly above $30K while ETH futures are holding around $2K. It is interesting that these prices are just a little bit higher from current spot prices.
Current geopolitical tensions are not helping the markets as they are impacting increase in price of food and derivatives, major contributors for increasing inflation all around the world. It should be added that distribution channels are still very fragile, especially with ongoing lockdowns in China and its major port in Shanghai. Recession is currently the most used word among financial professionals in the EU and US.
Additional weight on the crypto market downturn was added by the crash of Terra stablecoins. It seems that algorithmic pegs are not well suited for significant market moves, so the coin LUNA reached $0 and was withdrawn from trading. This also caused several other stablecoins on the market to lose their USD $1 peg, as in the case of USDT. On the other hand, this case was used by the policy makers on latest G7 meeting to call for stricter regulation of stablecoin market and also call for anti-money laundering laws to be strictly followed by companies issuing stablecoins, as well as that they should regularly provide information regarding amount of funds actually backing $1 peg.
Negative macroeconomic prognosis and current bearish trend didn’t have much impact on current Bitcoin and crypto market long term investors. As it has been officially confirmed by representatives of MicroStrategy, one of the largest holders of BTC, this company does not have any intention to sell its Bitcoin holdings at this moment. On the other side, Coinbase experienced a significant drop in share price since the beginning of this year, considering its weak profitability. The company noted that they will stop new hiring during the second quarter, in order to consolidate its earnings. During the World Economic Forum in Davos, held this week, mostly present companies were the ones in crypto technology. In the Promenade, part of the meeting where companies and governments have a chance to meet, most dominating companies were from the field of crypto business as well as Meta and Saleforce.
Crypto market
Funds outflow from the crypto market continued strongly during the previous two weeks. Since the beginning of this year, a total $1 billion has been wiped out from the market. Current total market capitalization stands around $1.2 trillion while daily trading volumes are relatively decreased. Bitcoin participation continues to be dominant. During the last two weeks, BTC even managed to increase its participation in total crypto market cap to 45% from 41% it was holding before the latest downturn. Highest drop in market participation was Tether, which dropped to 12% from 15% previously. Highest impact on this drop actually is coming from negative market sentiment due to LUNA collapse.
Crypto futures market was also traded significantly lower, due to the latest drop in spot prices. What is evident from current market prices, is that investors don't share too much optimism for BTC and ETH prices as of the end of this year. As per latest available data, BTC futures maturing as of the end of this year are traded modestly above $30K while ETH futures are holding around $2K. It is interesting that these prices are just a little bit higher from current spot prices.