Total cryptocurrency market cap under $1 trillion (Getty)
While the pre-session trading in New York indicated a strong start for US stocks, following seven consecutive days of decline for the “Nasdaq” index; Cryptocurrencies continued their decline, with “Bitcoin” falling below the level of 19 thousand dollars per unit, for the first time since last June, and the total market value of the cryptocurrency market falling below the level of one trillion dollars.
And before eight in the morning New York time; The price of the most famous and largest cryptocurrency by market capitalization fell to $ 18,750, down 5% compared to the previous day’s close, while “Ether”, the second and best performing cryptocurrency in recent months, fell by more than 9%.
The significant declines in the values of cryptocurrencies this week come as the latest episodes of the collapse of the prices of high-risk assets, on top of which are cryptocurrencies and all digital assets, with the successive rise in interest rates, specifically in the United States, to confront the largest inflationary wave the country has witnessed in more than four decades.
During the last four months, “Bitcoin” has been trading in the range of 18-24 thousand dollars per unit, after its price was more than 46 thousand dollars at the beginning of this year.
During the last six months, the Federal Reserve raised the interest rate on its funds by 2.25%, and is preparing for a new hike on September 21, which the futures and futures markets say will be in the range of 75 basis points (0.75%).
The increase in the interest rate on the dollar caused it to rise against most of the world’s currencies; Ordinary and encrypted, in developed, emerging and developing countries alike, and in the preference of investors to keep the green currency and stay away from other assets, as if they say that a loss of only 8% of purchasing power, representing the US inflation rate, will be the best that can be achieved in the current circumstances.
Vijay May, Vice President and Development Officer at Luno cryptocurrency trading platform, said that the current macroeconomic environment has become very difficult with the continued appreciation of the dollar, stressing that this puts pressure on all high-risk assets.
In an interview with CNBC on Wednesday morning, May said: “If the dollar begins to decline, we can see a return to high-risk assets, which will push cryptocurrencies, including Bitcoin, to rise again.”
After achieving record profits, and approaching the level of 69,000 dollars per unit in November of last year; Bitcoin fell, and with it most of the cryptocurrencies, with the beginning of a serious announcement from the Federal Reserve to raise interest rates and reduce quantitative easing programs. Since reaching its highest point towards the end of last year, the total market capitalization of cryptocurrencies has lost more than $2 trillion.
During the last four months, the currency “Ether” and the group of currencies called “Altcoins” outperformed “Bitcoin”, due to the announcement of a huge development expected to occur this month, called “merger”, for the Ethereum network, which is Ether is the base currency on it.
Cryptocurrencies need good news to help them recover the lost value and confidence of millions of dealers, after the recent dramatic declines. The drama was not limited to the evaporation of hundreds of billions of dollars; Rather, the matter extended to the bankruptcy of a number of trading platforms and institutions for keeping encrypted assets, and the collapse of a hedge fund for its dealings, and everyone confirmed with a sad practical experience that the so-called stable currencies were not, in fact, stable.
And improvements to the Ethereum network will not directly cancel out any of these negative outcomes. But from what we hear about improving environmental impacts and highlighting the potential for future development; It can be said, with some caution, that cryptocurrencies have a brighter future than many appreciate now. Justina Calma, a science and cryptocurrency analyst, says that “if the developments in the pipeline are successful, this will reduce the excessive energy use that cryptocurrencies require.”