Bitcoin Price Adjustment Pushes Crypto Market into Bearish Territory

Image of all crypto coins piled together in the dark.
The Bitcoin price adjustment will not solve the $1.5Tn market shrink.

Following a year and a half low last weekend, Bitcoin has managed to correct a bit. It reached just under $30k, less than half of its record value last November. Bitcoin’s apparent stabilization is now pushing the crypto market into bearish behavior.

3 issues are contributing to this situation, and investors are ranging from unhappy to downright enraged:

  1. The price of BTC is 44% of its historic maximum
  2. Terra and Luna’s price has reached $0
  3. The price of NFT products has slumped by 90% of top value

In total, it is estimated that more than 1.5 trillion US dollars have simply disappeared with this crash. That means many investors now have worthless crypto or significantly less value than they had only a few weeks ago. 

These developments have sparked several very interesting movements inside the market. Even entities are now receiving inconceivable requests from crypto holders. Namely, investors are calling for the reimbursement of up to $250,000 similar to securities for sovereign FIAT money. 

Certainly, officials will not answer these calls. In fact, they have stressed the market’s volatility and even issued warnings to investors multiple times.

Calls for Centralization

The Treasury Secretary for the Biden administration, Janet Yellen, stressed that a regulatory framework to protect against high risks is necessary. In the House panel on cryptocurrencies, she proposed Washington closes the regulatory gaps within the crypto market.

Regretfully, while this legislation might be possible to write, it might not be possible to implement. The very nature of blockchain-based products is decentralization. As a result, they are impossible to track without access to more than 51% of contributors.

These new rules will focus on the economic and investment side of the technology. The US legislators already find malicious behavior like cryptojacking unlawful.

The only option here is so-called stablecoins. These are crypto products pegged to a certain value. In turn, they should not suffer from so much volatility. The US Treasury Department pledged to make a workgroup that will toughen the regulations on these coins. For example, only firms backed by deposit insurance may issue these crypto products.

Yet, this option is flawed. It would allow qualified companies to issue ICO offerings protected by the US dollar. By default, this would increase the American currency’s supply. That will also further increase the current fears about inflation.

Image of a BTC/USDT price chart displayed on Binance's mobile application.
BTC lost 54% of it’s maximum value last year.

The Downfall of Luna and Terra

From the beginning of May 2022, the two cryptocurrencies launched by the company called ”Terraforming Labs” and run by Kwon Do, have crashed completely, reaching $0. For many, this is what created a huge hit for the crypto market. That’s because Luna and Terra’s downfall was as much a market result as a PR result by the operators.

Namely, both Mr. Kwan and many of the other boutique investors online had a perpetually toxic approach toward skeptics. That’s why they frequently denied comments and refused to disclose market operations. In the end, the only winner of the whole venture was Pantera Capital, a California hedge fund, that multiplied its investment by one hundred times.

Retail investors, many of which held the crypto in hopes that it will bounce back, have lost everything. The result even expanded beyond these two ICO; it also spread to the entire market. Lost trust will be even harder to recuperate than the money.

Even at this time, Terraforming Labs is going against the will of current investors. The company wants to fork from the current $LUNA coins, create LUNA classic, and start a new blockchain. Crypto experts and LUNA/TERRA holders highly discourage this move. Instead, they propose that a token burn would be much better to stabilize the currency’s price. It may even restore some of the confidence lost during the last few weeks.

NFTs Losing their Luster

From their peak in Q4 2021, the total market for Non-Fungible Tokens (NFT) has dropped a whopping 92%. This market is unlikely to recover with the reduction in trade and offer.

However, NFTs are not becoming a thing of the past; these claims would be misguided. As a matter of fact, the technology’s value has been proven. Many of the current NFT trading operations like the Solana blockchain are also seeing an increase in trades. That said, the luster and the hype many NFT offers were banking on has disappeared, leaving only those who find operative value in the technology.

Some market experts point out that the actual turnover of individual NF tokens has not reduced since the beginning of the year. They also say the data about reducing interest is erroneous. Still, the reduction in market prices is severe, and we cannot dispute the current buyer and investor responses.

At the moment, most investors are visibly moving away from PFP NFTs, those little pictures often portraying apes in different clothes. Rather, they are opting for more functional NFT products that have a use. These products are impossible to mess with, so they are much more useful as a data tool, not so much when presented as art

Image of a SHIB coin and QEST coin placed on a white background
New crypto rules and better coins will appear soon.

Crypto Is Not Dead

A similar shrink would spark a massive crash in other industries. However, the crypto market will likely change and grow from this. These crashes are nothing new in the industry, and all experienced investors have learned to expect them.

In the future, we will certainly start seeing a larger push toward creating a legal framework for cryptocurrencies, especially for the big ones like Bitcoin. Some governments are already considering the move made by El Salvador to make crypto a legal tender in their countries, and that will stabilize the product immensely.

What’s more, we can expect stabilization and a much more reasonable approach towards crypto investments. Following this, investors are flocking to more secure options. That means they might not buy into venture capital schemes as before. People are now focusing more on actual cryptocurrency products that have direct utility, not just allure.

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