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The global cryptocurrency market cap continues to decline today, declining nearly 7% in the past 24 hours to reach US $ 1.38 trillion. Meanwhile, the price of Bitcoin has now fallen below US $ 33,000 for the first time since January of this year, losing 18% in the last week alone.
The market, reeling from the mid-May crash, was unable to recover in terms of sentiment and retail influx, Hunain Naseer, editor of OKEx Insights, said in an interview with Forkast. News. The crash wiped out many retail investors who made significant losses, and without interest from individuals, the market hype remains silent.
Ethereum has also fallen over 21% in the past 7 days and is currently trading at around $ 2,000, with Ether prices falling further 8.78% in the past 24 hours.
The next ETH upgrade is a major event for the market, but much of the initial hype is likely to have been incorporated during the major rally that saw ETH cross $ 4,000, added Naseer. Now, the market will likely wait for actual execution and follow-up before it can pick a direction for the next price move.
Speaking of the hype in the market, heavyweight investor and head of Scion Asset Management Michael Burry warned that the cryptocurrency market is overheated and over-leveraged. Meanwhile, China’s crackdown on crypto mining has now hit Sichuan and further decimated the Bitcoin hash rate.
Although the price of BTC managed to break through the US $ 40,000 mark last week after El Salvador announced its adoption of cryptocurrency as legal tender, the peak was short-lived and Bitcoin is now at new below US $ 35,000. So far, reports of a proposed legislation in Paraguay to make Bitcoin legal tender appear to have little effect on the sideways trend of BTC.
Even the news from El Salvador did not give a major boost to BTC prices, first because the news was a good move, but not a change in itself, especially now that the World Bank has rejected support for implementation, Naseer added.
Elsewhere in the crypto world, altcoins hurt even more. Other notable crypto price fixes over the past week include Cardanos ADA, Dogecoin, Ripples XRP and Uniswap which fell 15%, 22%, 22% and 21% respectively.
Burry warns of the crypto bubble
Michael Burry, the head of Scion Asset Management who became a household name after a bestselling book and movie The Big Short, presented his winning bet against the housing market before the 2008 global financial crisis is now warning investors against what he calls an over-leveraged bubble in crypto stocks and even.
All the hype / speculation done is attracting retail ahead of the mother of all crashes, Burry wrote in a series of tweets. When crypto drops to trillions or stocks of memes drop to tens of billions, #MainStreet losses will approach the size of countries. The story has not changed.
Burry deleted the tweets shortly after posting the warning last Friday, as his Twitter activity earlier this year allegedly led to an investigation by the United States Securities and Exchange Commission, due to his popularity with investors. detail since the release of The Big Short.
In a series of tweets in March, which have since also been deleted, Burry also said: “$ BTC is a speculative bubble that presents more risks than opportunities, although most supporters are correct in their arguments as to why. why it is relevant at this point. point in history [] If you don’t know what leverage is involved in the preparation, you might not know enough to own it.
While Burry was one of the first to recall the housing mortgage bubble in 2008, which was fundamentally caused by the growth of subprime mortgage credit which ended up in excessively risky and predatory products, the situation with the crypto cannot be compared because crypto is more transparent, some analysts say.
The perspective is the same as always, because [Burry], that is, leverage can have a dramatic effect when people are liquidated and there is not even enough liquidity to close positions which creates a race to the bottom . Justin dAnethan, head of exchange sales at Eqonex, the digital asset firm, said in an interview with Forkast.News. A distinguishing factor, however, is that during the 2008 crash, leverage was associated with other products to mislead people about the real risk involved. In the crypto space, it’s a bit more closed and clear. That being said, there is also a little more leverage and less regulation.
But others say Burry’s view that the crypto markets are over-leveraged and pose a serious risk to crypto investors is still important to consider.
There is a place here for discussion. Huobi, for example, recently reduced its leverage offerings to 5x. Most crypto derivative exchanges still offer up to 125x. As the regulations come into force, we can expect more of such limitations to be put in place. Long-term Bitcoin investors should celebrate such a development, Ben Caselin, head of research at AAX exchange, said in an interview with Forkast.News. Other than that, Michael Burry’s statements are speculative and carry the same weight as any other financial analyst.
Burry remains a favorite among the crowd of memes investors. He helped lay the groundwork for the growing retail frenzy that saw Main Street investors outperform Wall Street hedge funds, after Burry himself took a bullish stance on video game retailer GameStop. Corp.
Bitcoins down hashrate
China has accounted for more than half of global Bitcoin production in recent years, but as the country’s cabinet continues to crack down on Bitcoin mining, an exodus of miners from the country has started. One victim of the crackdown on Bitcoin mining has been the network hashrate.
Sichuan is the last of China’s four major mining centers, including Inner Mongolia, Xinjiang and Yunnan, to feel the effects of government crackdown on mining operations. As the Bitcoin mines are closed, the hashrate, or the power supporting the Bitcoin network, drops dramatically.
The news that China has acted even more aggressively to limit the electricity supply and overall operations of bitcoin miners doesn’t sound great, to be sure. It’s interesting to see prices holding up relatively well actually, said dAnethan, of Equonex. Longer term, BTC is still mostly limited to a range, between 32K and 42K. Nothing to fear. If anything, onchain data suggests less influx of exchanges, a large supply of stablecoins, miners holding (not selling), and more coins held long term in wallets.
AAXs Caselin agrees that the actual damage to the price of Bitcoins has been relatively small compared to altcoins. The head of research on the AAX exchange believes that in the long run, cracking down on minors could be a net positive for the network, but could intimidate the new generation of memes investors.
These developments are actually constructive as we can expect a better distribution of the global hashrate among the different jurisdictions, Caselin said. Current price movements can be frightening for new retail traders, those same traders who might be tempted to invest in coins and other trendy tokens.
Although OKExs Naseer believes the long-term fundamentals of Bitcoin and Ethereum remain positive, he said that the overall crypto market lacks a catalyst to rekindle the upward momentum and that we are seeing a phase of consolidation.
There may be further declines along the way, as the longer a recovery takes, the weaker market sentiment weakens. Naseer added.
At the time of publication, Bitcoin prices have fallen 7.33% in the past 24 hours, and BTC is trading at US $ 32,622. Meanwhile, Ethereum has fallen 8% and the price of Ethers stands at $ 2,003, according to CoinMarketCap.
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