The cryptocurrency market will bounce back. This is the thought of Gregory Klumov, CEO of STASIS and Victor Argonov, senior analyst at EXANTE.
Certainly, the last few days have been turbulent. The news that Tesla will no longer accept Bitcoin as a means of payment, coupled with the tweets of CEO Elon Musk have driven Bitcoin to below $43,000, losing about 30% from its all-time high near $65,000.
However, there are factors that give hope for a recovery in investor confidence.
Victor Argonov, senior analyst at International FinTech EXANTE, explains:
“The markets continue to find support from optimism surrounding the re-opening of major economies and ongoing backing from major central banks. Investors still appear keen to buy every dip in stocks and sell the dollar in favour of risk-sensitive commodity dollars and British pound. Investor sentiment remains cautiously optimistic, with concerns about sky-high valuations for many US technology stocks and runaway inflation subsiding a little. Several FOMC members have come out to speak in the aftermath of the big rise in US CPI last Wednesday. They have made it crystal clear that the Fed won’t be tightening monetary policy as price pressures are likely to be transitory. With investors having been re-assured, they have piled back in the tech sector after a mini dump, while non-interest-bearing gold has also broken out”.
This rosy scenario doesn’t apply to Bitcoin, which is fresh off a downward plunge that has worried many. Says the EXANTE analyst in this regard:
“But not all risk assets have been flying. Bitcoin, for one, has come under pressure after Tesla said it will halt using the digital currency as a method of payment, owing to concerns over the environment. Although Elon Musk has said Tesla intends to use Bitcoin for transactions again as soon as mining turns to more sustainable energy, this won’t happen any time soon. It is very difficult for miners of the digital currency that use fossil fuels and coal, especially in certain parts of the world such as China, to switch to renewal energy supply. There is a risk that other big companies who have adopted Bitcoin may follow suit given how sensitive the issue of carbon footprint has become”.
The cryptocurrency market according to STASIS
The sentiment seems to be shared by Gregory Klumov, CEO of EXANTE’s sister company STASIS, who explains some of the reasons behind the market crash and how it will recover:
“The latest big-time crypto market crash was ignited for a number of reasons. First of all the margin longs being liquidated and moved off Binance to alternative exchanges and blockchains were a kick in the teeth for those who invested on the last all-time-highs. Due to the rumour that there’s an ongoing investigation, many users have panicked. However, once the world’s largest exchange settles things in the legal field, we’re likely to see the comeback of trust and the continuation in the cryptocurrency growth rate”.
In reality, rumours of an investigation involving Binance were quickly debunked by CEO Changpeng Zhao. There was no investigation, although the exchange is working with the authorities to combat some “bad players”.
There is another problem according to the CEO of STASIS: many enter the cryptocurrency market without proper preparation, but dragged along by FOMO:
“Moreover, the crypto world has shown us that many investors do not do their own risk evaluation but just follow the trends blindly. My best advice to anyone who is afraid of tomorrow in crypto markets would be to start researching the space properly. When the storm comes, no ship can stay safe in the harbour except the ones that have stablecoins onboard”.
And that is advice that always applies.