Crypto Wrapped: June 13th- June 19th
This past week, significant milestones were hit in crypto markets — and not of the desired kind. It’s been a particularly bruising week for both the stock and the crypto industries overall, and that is reflected in market movements that we observed during that time. The decline was gradual, as bad news about economic trends in the United States broke incrementally and reverberated around popular crypto markets such as Bitcoin and Ethereum. With experts believing that worse is yet to come, here’s what we saw play out over the week:
What happened in crypto markets last week?
Not a lot of good, that’s for sure. Markets plummeted for the most part of the week, as news broke from the US of the highest inflation rate in over 40 years. Crypto wasn’t the only market that suffered however, as stock markets fell too. The total cryptocurrency market cap fell below $1 trillion for the first time since early February, falling nearly $68 billion in the space of 4 days. While a huge amount of crypto is traded across markets on a daily basis, this is still a pretty dramatic fall.
Why did crypto prices fall?
The top level answer is relating to the inflation news coming out of the United States. The root and branch answer is closer to the fundamentals that drive crypto prices: supply and demand.
On the back of news that US inflation was hitting decades-high levels, traders offloaded crypto and stocks, and demand for investments fell as a result.
In times of market decline, people go back to basics, and so crypto and stocks become that bit cheaper as they’re not as appealing as in boom times. So you see how one factor leads to another.
What were the most notable events in the week?
Well, Bitcoin and Ethereum fell below $20k and $1k respectively for the first time since the end of 2020. These two cryptocurrencies always tend to lead the way when setting the direction of the market, and they suffered over the course of the week — hence, the rest of the market followed.
Also, remember TerraUSD? Well, the stablecoin USDD also got unpegged just like the former, trading at $0.93 for a short period on Sunday night. That might not sound like a great deal of difference in layman terms, but in stablecoin terms, it’s astronomical.
Crypto lending company Celsius also paused all transfer and withdrawal activities, which has placed huge pressure on the company’s CEO Alex Mashinsky to find a solution to his company’s current issues. Investors are still waiting for answers about when they will be able to gain access to their crypto funds on the platform, and these events only served to accelerate negative market sentiment as the week developed.
All in all, it’s not been a good week for the industry.
You mentioned that stock markets fell as well as crypto markets — does this mean they’re operating within the same realm as each other?
Absolutely it does. Cryptocurrencies are a form of investment for many people, just like stocks, so we see the same behaviors exhibited from both markets when macro external events like rising inflation have the impact that they do.
The nature of both industries is about the same, so there are natural parallels between market behaviors that can be seen.
What can we expect to see in the coming week?
This will depend on further bad news coming out of the United States. Crypto markets are currently being driven by a huge fear index, so there’s very little positive sentiment around. Experts are predicting that there’s worse to come, and traders will be bracing themselves for this possibility. There will be more pain to be felt before any gains come back.
Where does this leave crypto for the time being?
Markets overall are not in a good place, including crypto of course. However, ‘crypto winters’ (a term given to more harsh market conditions) have come and gone in the past, so there should be no long term concerns about the longevity of the industry. It’s been here before, will most likely be here again in the future, and has managed to recover each time.
If you’re looking for a guide to see where the market’s heading, keep a close eye on Bitcoin. It is generally the market shepherd — the direction it heads in, the rest tend to follow.