Bitcoin fell to its lowest level in two years on Monday. The collapse of FTX is likely to affect the markets for a long time, according to the analyst.
A week ago, Sam Bankman-Fried’s (30) cryptocurrency exchange crashed.
It has created significant ripple effects in the cryptocurrency market. Billions of dollars have disappeared and cryptocurrency investors around the world have been affected. In addition, the bankruptcy is a major bending blow to confidence in digital money.
Analyst Vetle Lunde at cryptocurrency analysis firm Arcane Crypto says the mood in the market is bad right now.
Markets can decline for several years. He says the consequences will be visible for a long time to come.
Bitcoin, the most famous cryptocurrency, had to undergo a review after the bankruptcy of FTX.
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On Monday, the bitcoin price fell to around $16,000. He’s well into the record $64,000 list from last November. Aside from a brief dip at the beginning of the month, the rate has not been this low since November 2020.
For the year, bitcoin has depreciated by 66 percent.
Cryptocurrencies Ethereum and Dogecoin have also fallen sharply recently. The former is down 8.5 percent this week, while Dogecoin is down more than 10 percent.
Liquidity crisis
Lunde explains that the cryptocurrency market looks bad structurally.
He points out that the credit market in the cryptocurrency industry has grown by “bull marketThe market situation is characterized by investor confidence, optimism, and positive expectations of continued good results. It often leads to an overvaluation of stocks.As of early 2020, which has since been occupying a central market position. Cryptolenders have contributed liquidity and funded markets determining prices via exchanges.
Unfortunately, we now know that the amount of risk for some of these loans has proven to be very high. Loans have been issued to many borrowers who have been taken out of the market throughout the year, and there is a high risk of further defaults as liquidity problems build up. The loan market is under pressure, Lundy says, and it is certainly affecting the entire cryptocurrency market.
According to the analyst, many crypto banks are about to face liquidity problems. Compare financial crises in traditional markets.
– Unlike traditional markets, the cryptocurrency market has no central authority to intervene in such crises, and the market itself must remove this uncertainty, says Lundy.
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Confidence in Congress
Kryptobørsens FTX founder Sam Bankman-Frieds helped design the US crypto regulation proposal and gained the confidence of the USA Congress.
There’s also dark organizational and institutional activity, says Lund.
In addition, FTX has been a favorite with well-known investment funds from the traditional markets who will probably now think twice before considering participating in cryptocurrency-related investments again, he says.
The Solana cryptocurrency, marketed by Bankman-Fried, continued to take a hit and fell another 9 percent in the past 24 hours. So far this year, the cryptocurrency is down a whopping 93 percent.
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