Market instability hits bitcoin, as Meta launches NFT support and Gucci accepts crypto
Market analyst and eToro crypto expert Simon Peters gives us his weekly crypto and blockchain update this week focusing on the fall in the value of the crypto-asset market.
Before getting into Peters’ assessment, analyst Josh Gilbert put bitcoin’s decline into perspective by saying, “Bitcoin had been quite resilient so far in 2022 given the current state of the economy. macro environment – but is now feeling the full effect of the market correction.
“Bitcoin’s growing correlation with other asset classes is increasing, such as stocks and shares. In this sense, bitcoin is a victim of its own success, with more institutions getting involved and therefore trading differently than others. about 3-4 years ago.
“Bitcoin is now facing its biggest test after breaking below US$30,000. This is the lowest bitcoin since July 2021, and if the break below US$30,000 holds, we could see strong selling, which could lead to further decline in the short term.
“Inflation data released on Wednesday in the United States will be key to this market correction. If we see inflation starting to ease year-on-year and stabilize month-on-month otherwise, it could potentially help calm the markets.
“Investors need to buckle up for a few volatile days and remember the basics of investing: diversify, understand what you’re investing in, control your emotions, and never invest more than you can afford to lose. “
Compounding struggles for the crypto-asset market
The crypto-asset market faced a sell-off last week, adding to the market’s difficulties since the start of the year.
Bitcoin has seen its value plunge 16% in the past few days, after trading as low as around US$39,000 earlier in the week. It has been on a downward trajectory since Thursday and is currently trading just above the US$33,000 level. It is now more than 50% below its all-time high (ATH) set in November last year.
Ether suffered a more severe drop of around 17% since Thursday as the cryptoasset struggled against numerous market hurdles. Ether traded as high as around US$2,900 on Thursday but has since fallen to trade just above US$2,400.
The current concern for crypto-asset investors is when the slide will end. The market is caught up in the broader adversity of investment markets battling to decide where comfortable levels are following interest rate hikes designed to stifle runaway inflation in the Western world.
The market now moves more closely with other major risk assets such as technology and other stocks. This indicates the major shift in the presence of institutions within the crypto-asset market, which now represent a much larger proportion of ownership and tend to bundle their crypto decision-making with other major assets.
While this may not be a relief for crypto-asset investors facing major declines, there is a broader point here that retail investors are no longer facing the market alone and the very presence of institutions as holders is positive for value and long-term potential.
Market volatility and underperformance tend to correct over time. It is therefore essential that investors ensure that they are happy with their investment records and are prepared to stay the course for more volatility to come.
Market instability threatens UST stablecoin peg
Continued uncertainty in the crypto-asset market caused the UST stablecoin to briefly lose its peg against the US Dollar.
The UST is part of a basket of stablecoins that are essentially digital tokens that mirror the value of traditional fiat currencies. The UST uses a basket of assets in order to maintain the peg to the USD, but this is being tested by unfavorable market conditions.
Over the weekend, there was dumping of assets across various platforms and withdrawal of liquidity pools. $150 million in withdrawals came from the backers of the stablecoin, Terraform Labs (TFL), which re-deposited the money once it realized the UST was unpegged.
This is not the only time the stablecoin has temporarily pulled its value from the USD. But the environment of fear and uncertainty in the crypto market right now has made it more likely. TFL now has a job, like a nation-state with fiat currency, to defend the peg.
This basically means throwing assets at it to maintain its value. What is worrying here is that often when a country faces a currency crisis, it can only defend its money so long before the price drops. This could soon be the case with UST depending on TFL’s reserves.
Meta to launch NFT support
Reports are circulating that support for NFTs on Meta platforms such as Facebook and Instagram may be imminent.
The plans will use blockchains such as Solana, Ethereum Flow, and Polygon according to a CoinDesk report. A pilot program should be launched today.
This comes at a tricky time for the NFT market. Amid broader crypto-assets – and indeed traditional assets – NFTs have seen their market values drop significantly. But some launches that continue to materialize are still seeing very strong demand, suggesting that the appetite is still there to hold some of these assets.
The impact of Meta’s launch on NFTs won’t necessarily change the face of the market, but it will likely help grease the wheels, so to speak. Any opportunity for technology to be more accessible to normal people is a good thing and contributes to future market potential.
Gucci will start accepting crypto
Fashion brand Gucci has announced plans to accept crypto-asset payments at some of its stores in the United States. Customers will be able to pay in crypto-assets such as bitcoin, dogecoin, ether, litecoin and shiba inu. This is set to launch at its Los Angeles branch and in New York as well.
While the luxury brand‘s move to crypto is unlikely to be the break that will burst the dam of crypto-asset use, it’s a remarkable time to see a pioneer like Gucci step up. in the space.
While forays into luxury brand NFTs have been quite frequent over the past year, they still lag far behind crypto-asset payments. Fashion brands such as Gucci make their living as trendsetters, so it will be interesting to see if other fashion houses follow suit to keep up.