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Cryptocurrency market can be in extremely deep Crisis over the past 10 years.
The capitalization of cryptocurrencies on Friday lost over $ 100 billion. This is the largest sale of digital assets over the past 2 months.
Friday showed a general trend – the flight of investors from risky assets. The fall in shares was noted on all stock exchanges, simultaneously with the growth of the dollar index.
Factors that can plunge the cryptocurrency market into a deep crisis
This week, bidders played off reports of a severe drought, which was officially recognized in China, the EU and African countries. Climate change increases food prices, the price of transportation in drying shipping channels in Germany and the Netherlands is growing.
Because of this, the authorities are beginning to limit the supply of energy from hydroelectric power plants due to a decrease in the water level in reservoirs to a critical level. The cost of electricity will increase, companies engaged in the mining of cryptocurrencies will suffer even more losses.
Higher food and energy prices will accelerate inflation. Central bank rates will become even higher. Due to tight monetary policy, the flow of liquidity to cryptocurrencies will be reduced to a minimum. The cost of loans for mining companies will increase dramatically.
An important nuance is that 3 years ago spot volumes prevailed on the exchanges. The rise of cryptocurrencies has led to the growth of the derivatives market, exceeding the turnover of spot trading by 69% in July. What are the dangers of derivatives, showed the mortgage crisis of 2008. Loans issued for real estate turned out to be unreliable. The mortgage bonds issued were the most traded with futures and options. But then the panic sell-off in U.S. bond derivatives undermined the global economy.
At the moment, traders have purchased a huge number of options for September. They will recruit futures in the hope of profiting from the implementation of the Ethereum conversion. But how much their expectations will be justified is unknown. But we can assume what will happen at the time of profit taking. Huge volumes of sales will be thrown into the market. The September fall is likely to result in double-digit percentages of virtual currency failures.
Thus, the cryptocurrency market may find itself in an extremely severe crisis, which can be compared with what happened in 2008. However, any crisis allows the market to clear up and new players will come to the place of those who could not withstand it.
Author: Vadim Gruzdev, Analyst Freedman Club Crypto News
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