Why have bitcoin and crypto lost 60% of their market capitalization from their all-time highs?

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Macro Markets, hosted by crypto analyst Marcel Pechman, airs every Friday on the Cointelegraph Markets & Research YouTube channel and explains complex concepts in simple terms, focusing on the cause and effect of traditional financial events on the market. daily crypto activity.

Macro Markets’ latest show begins by exploring why the crypto market cap is around 60% below its all-time high, while the S&P 500 is less than 15% off its peak. For Pechman, the sector suffers from a huge problem, because it does not correspond to a commodity or an exchange currency. Also, not all mutual funds can hold crypto.

Lesson? If Bitcoin (BTC) and Ether (ETH) are primarily understood as alternative risk assets, this is how they will trade. Therefore, one should not waste time looking for theories as to why the crypto has not been able to reach new highs.

Moving on to the next topic, according to Pechman, NVidia’s $2.3 billion short-seller losses don’t paint the real picture. This is because a short seller can endure the pain if they don’t close the loan, so as long as they have enough margin deposits, those losses are still open.

This is similar to what a buyer experiences who has paid a much higher price for their crypto. Until that person makes the sale, the losses are not real. The difference is that the short seller must find someone willing to lend those shares to keep the trade open.

A Bloomberg article mentions that Nvidia is the fourth best-selling stock in the United States, behind Apple, Tesla and Microsoft. According to Pechman, the four most short-sold stocks are also among the top 10 constituents of the S&P 500, which poses a problem: These short sellers may have been market neutral the entire time, buying futures on indices and selling individual stocks.

Finally, the issue discusses Chinese growth of 5%, the disappointment of investors and its consequences on the markets. For Pechman, the most important news is China’s reluctance to release new stimulus packages, which could be a strategy to further weaken the remaining global economies.

The Bloomberg article shows how China is a key player in global commodities. If commodity prices and the global trade balance continue to weaken, that means less tax revenue for those other governments. Pechman points out that Germany has just entered a technical recession and the United States is right behind.

Pechman believes the crypto result is initially negative as it drains liquidity from the markets, and investors will seek more short-term government bonds and cash. But if the US dollar loses strength, that is positive for the crypto in the medium term.

If you are looking for exclusive and valuable content from leading crypto analysts and experts, be sure to subscribe to the Cointelegraph Markets & Research YouTube channel. Join us at Macro Markets every Friday.

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