BENGALURU: The dramatic sell-off in the cryptocurrency market on Monday pushed Bitcoin down over 14 per cent and Ether experienced its steepest decline since 2021 sent shockwaves through the industry.
Top token Bitcoin’s retreated to below $50,000 in early trade added to a 13.1 per cent drop last week that was the worst since the period when the FTX exchange imploded.
Bitcoin trades at $52,208 at 1.50pm, down 10.20 per cent.
Ether shed over a fifth of its value before paring some of the slide to change hands at $2,286. Most major coins were deeply in the red.
However, Tim Kravchunovsky, founder and CEO of the decentralised telecommunications network Chirp, said that crypto has actually held up relatively well in US dollar terms compared to traditional stock indexes, despite today’s turmoil.
“This morning, all of us have woken up to one of the biggest crypto sell-offs we’ve seen this cycle. But this time, it’s not a crypto specific issue – rather, macroeconomic factors are in the driving seat. With the Bank of Japan unexpectedly raising rates and fears that the US Federal Reserve made a mistake by keeping interest rates unchanged at its July meeting, all risk assets are on the chopping block. Crypto assets just went first because they trade 24/7.”
In actual fact, he said that crypto sell-off isn’t that bad if “we compare it to what’s happening in traditional markets.”
Decoupling
Japan’s Nikkei 225 index closed 12.4 per cent lower in what marks the second worst single-day rout since Black Monday in 1987, while the S&P 500 opened 4.1 per cent lower and the tech-heavy NASDAQ is down more than 5 per cent.
“In traditional finance, these are huge numbers. So against this wider backdrop, crypto is actually holding up quite well in US dollar terms.”
Indeed, he added that the market is now beginning to see some signs of recovery in cryptocurrencies, with Bitcoin now trading above $52,000, having fallen to a low of $49,221.
“Over the coming hours and days, we may well see a decoupling of crypto from traditional stocks, similar to what we saw in 2020. Back then, crypto staged a much faster and more pronounced recovery from the pandemic-driven collapse than traditional stock markets, and we may well see something similar this time.”
For crypto investors, this sell-off represents an opportunity to review their portfolios and solidify their convictions.
As the market recovers, he said that it’s the projects with real-world utility that will likely deliver the most consistent returns.
“Examples include data storage, infrastructure, cybersecurity and decentralized physical infrastructure networks (DePINs). All of these bridge the gap between Web3 and the real world, which will help ensure their longevity,” Kravchunovsky said.
