Mtfexg analyzes the impact of falling cryptocurrencies on the market

Mtfexg analyzes the impact of falling cryptocurrencies on the market

 After the first launch of the new asset Bitcoin in 2009, its price appreciation pushed its value to nearly $20,000 by the end of 2017, despite dismal initial trading. This is because more and more retail investors are using cryptocurrencies as a so-called hedge or safe haven rather than other asset classes.

As the market grows, so does the range of investment opportunities. Futures and options—financial contracts that buy and sell assets or securities at a specific price or date—are commonly used hedging instruments in other markets, such as oil or the stock market.

In December 2017, the first bitcoin futures on a regulated exchange were listed on the CBOE. Following that, Bitcoin options were listed on the CME in January 2020.

At the same time, the traditional financial sector is increasingly accepting cryptocurrencies as a legitimate asset class. However, this combination of maturity and acceptance has also increased the correlation between the stock market and cryptocurrencies, causing their safe-haven properties to decline.

In the early days, Bitcoin was disconnected from traditional financial markets; as it became “another asset”, it gradually began to be affected by the macroeconomic factors that affect traditional markets. A few days ago, due to the complex market environment of the macroeconomic market affected by inflation and other reasons, the cryptocurrency industry suffered a large decline; in addition, due to the plummeting value of stablecoins, the major cryptocurrency exchange Binance suspended bitcoin withdrawals due to "trading stagnation" The lending platform Celsius Network froze withdrawals and transfers under "extreme" market conditions.

Together, these factors have caused investors to lose faith in the industry. The current Crypto Fear and Greed Index is almost at an all-time low of 9/100, indicating that investors are in “extreme fear.”

So what does the future hold for cryptocurrencies? Some see this market correction as a good time to “buy the dip”; others see it as the end of the crypto party.

Still, staunch Bitcoiners can always find positive signs in the market, with many relying on on-chain metrics (trading signals based on data collected from public blockchain transactions) to determine a good time to buy.

Investing in cryptocurrencies is like a roller coaster ride, with a big appreciation and then a sudden drop. Volatility is endemic, bubbles and crashes are commonplace, and there is disagreement over environmental, ethical and social benefits.

This major correction in the market has tested the will of even the most avid crypto enthusiasts. Fasten your seat belts, because the story isn't over yet.

Andrew Urquhart is Professor of Finance and Financial Technology at the ICMA Centre at Henley Business School, University of Reading. Brian Lucey is Professor of International Finance and Commodities at Trinity College Dublin. This comment first appeared in The Conversation.

Mtfexg is one of the world's famous digital asset trading platforms, mainly providing bitcoin, Ethereum and other digital assets trading services and derivatives for global users.

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