Cryptocurrencies continued to rise on Tuesday with bitcoin rising 5.98 percent to trade at $21,159, ethereum rose 7.46 percent to $1,155, binance coin rose 5.32 percent to $223, ripple surged 3.4 percent to $0.327, according to CoinDesk data at 13.05 IST.
At the same time, Solana and polkadot witnessed massive jump by surging 15 percent to hit $37, and 11.83 percent to touch $8.16, respectively.
Also, Cardano rose 7.2 percent to $0.498 and stellar rose 3.14 percent $0.11. The crypto market cap stays above $925 billion, racing to reclaim $1 trillion mark, as per CoinMarketCap data.
Much of the decline followed the US Fed’s plans to hike rates by 75 basis points to curb inflation. Also, in the second week of May, Terra blockchain was halted after its crypto token Terra Luna tanked 99 percent from a high of $118.
This gave a considerable blow to the trust in stable coins – which were earlier believed to be more stable.
The rout in crypto markets was further accelerated by the crisis at Celsius Network which paused all withdrawals, swaps and transfers w.e.f. June 13.
Reasons for crash
Likewise, these are plenty of reasons for the unprecedented decline in crypto tokens, which also include critical statements by the likes of Bill Gates calling crypto projects as shams based on a greater-fool theory.
Sidharth Sogani, CEO of CREBACO, blockchain research firm, said, “The fall in prices is the result of price action coming from the global cues. This is mainly due to the federal reserves’ change in interest rates. Also, the global market has lost over 20 trillion dollars and the S&P is likely to correct even further from these levels.”
About the possibility of cryptocurrencies reclaiming previous levels, he said, “They will again see the previous levels. In the next bull cycle, we expect bitcoin to make a new all-time high. This current cycle is likely to go on for the next 6-8 months.”
Vikas Ahuja, CEO of CrossTower India, says bitcoin — which is supposed to perform as a safe haven asset — is being tested now.
“Not all digital assets are alike. However, the one that is being tested the most in our minds is bitcoin because, unlike many other digital assets, bitcoin is supposed to perform as a safe haven asset or a store of value during a period of stressful macroeconomic times. In the space of a few short years, we have had a global pandemic, a deep recession, and the biggest inflation shock in 40 years, and now a war," he said.
"Monetary policy is being tightened to combat inflation, which is pulling liquidity from the markets. Safe haven assets such as gold and real estate should perform well during periods of high inflation and these market conditions. Bitcoin is being tested,” he further added.
Gaurav Mehta, Founder of Catax, meanwhile, argues that this decline may be due to the fact that their fundamentals are not right.
“Until recently, Defi (decentralised finance) platforms were offering as high as 18-20 percent return on investments. The market would crash someday without strong fundamentals. On the top of it, there is a massive sell pressure. Those people with large capacity started to refrain from buying and have started to invest in hard assets because cryptos are not seen as credible place of investment,” he said.
However, regardless of the ongoing fluctuation, one thing is clear — crypto prices are not immune to gravity, and they will not continue to march in one direction alone.