Bitcoin is teetering at $30,000. How did traders and investors react to the crash?
The capitalization of the crypto market this week fell to $1.4 trillion, and the price of Bitcoin dropped even below the $30 thousand line for some time. The sharp collapse of almost all popular altcoins naturally caused a panic in the market. In more detail, the behavior of individual traders, investors with large capital and entire companies with BTC on the balance sheet in their latest reports was considered by analysts of the CoinShares and Glassnode platforms. Let's talk about the situation in more detail.
In general, what is happening on the market can be characterized by the following screenshot.
Luna became the drop leader due to problems with Terra and its stablecoin UST. The price of the coin fell by more than 83 percent during the day - from $34 to the current $5. For a week, the rate of the crypt completely collapsed by 93 percent. Here is a graph of the cryptocurrency for two years.
Why did the cryptocurrency market collapse?
Analysts have looked at evidence that some investors have used price “turbulence” to move assets into Bitcoin, Ethereum , and exchange-traded products based on other cryptocurrencies. However, it is worth noting that, unlike individual market players, wealthier investors with large capitals - they are often called "whales" - usually have enough "financial cushion" to weather the storm in the market. In other words, a further collapse of the industry by a couple of tens of percent will not leave them hungry, and this is also important for individual investors to take into account.
Over the past week, the net inflow of funds into investment products amounted to $40 million. Separately, approximately $45 million has been invested in the Bitcoin ecosystem. This is a sign that investors are taking advantage of the situation to enter a limited number of investment products based on the main cryptocurrency, given the collapse. However, again, large players will have money to buy crypto in the coming months.
According to Decrypt sources , one such investment could be Grayscale Bitcoin Trust (GBTC) units. They have fallen in price by 19 percent, while the value of Bitcoin itself has fallen by more than 23 percent - all in the last five days. The situation was commented by the head of the research department of CoinShares, James Butterfill. Here is his retort.
Interestingly, we have not seen such a surge in activity in investment product trading, as it usually happened in previous periods of market decline. It is still too early to talk about this as the end of a 4-week period for the collapse of cryptocurrencies.
One possible reason for this trend is that traders believe that the current downtrend will be weaker than the previous ones. That is, such serious collapses as during the previous “crypto winter” should not be expected, some say. Recall that then the cost of Bitcoin has collapsed by almost 85 percent since reaching its historical maximum. If these figures are extrapolated to the current situation, BTC could allegedly fall to almost $10,000.
See also: The creator of Cardano announced the beginning of a new “crypto winter”. Is it really?
But while others are panicking, the El Salvadorian government is taking advantage of the moment to accumulate even more BTC on its balance sheet. This week, President Nayib Bukele announced on his Twitter that the state has acquired another 500 BTC for approximately $15.3 million. Thus, the total amount of bitcoins on the balance sheet of the government has already exceeded 2,300 BTC, or $72.5 million at the current rate of the coin.
Recall that in September 2021, El Salvador became the first country in the world where Bitcoin received the status of legal tender. While such a bold move was hailed by many cryptocurrency advocates, it drew mixed reactions around the world. In particular, he was criticized by representatives of the International Monetary Fund (IMF) and some US officials .
In addition to looking for geothermal BTC mining opportunities, the country is also gradually building its own coin balance for its reserves. However, it is not yet clear who exactly buys Bitcoin - Bukele himself or the government. During the previous BTC buying round, El Salvador already had unrealized losses due to this strategy. And a new round of coin acquisition with a further fall in the crypto market can only aggravate the situation.
The bad news in the coin industry did not end there. The CEO of mining and investment platform Mining Capital Coin (MCC), Luis Capuzi Jr., has been charged with a $62 million fraud that has affected thousands of investors. According to a press release from the US Department of Justice, Capuchi promised to use the investments to mine cryptocurrencies, but instead redirected the funds to crypto wallets he controlled. Capuchi also fraudulently advertised MCC "trading bots", claiming they were capable of making "thousands of trades per second" and generating profits for investors.
The indictment alleges that Capuchi created a pyramid scheme by promising gifts to a network of promoters if they were successful in attracting new investors. An iPad, an Apple watch, and even the fraudster's personal Ferrari were offered as rewards. Naturally, no one received the promised prizes, and it is unlikely that they even existed in reality.
According to Decrypt sources , the suspect faces up to 45 years in prison if found guilty on all charges. He faces charges of wire fraud, securities fraud and international money laundering. The situation was commented by Assistant Attorney General Kenneth Polite, Jr. from the Criminal Division of the US Department of Justice.
Cryptocurrency scams are disrupting financial markets around the world as attackers deceive investors and limit the ability of legitimate entrepreneurs to innovate in this growing sector. The department intends to monitor physical and digital money to expose criminal schemes, bring fraudsters to justice and protect investors.
Law-abiding business people are indeed making a worthwhile investment in embracing innovation. Recently, a subsidiary of SBI Africa Co. Ltd, under the name SBI Motor Japan, announced that its customers can now make payments for used cars using Bitcoin and XRP .
According to the SBI announcement on Monday, this event marks the first use of XRP in cross-border e-commerce in Japan. BTC and XRP transactions will be settled at SBI VC Trade Co. Ltd is a cryptocurrency exchange owned by SBI. The platform, according to SBI representatives, will use appropriate security practices to prevent money laundering and terrorist financing through cryptocurrency transactions.
We believe that the current conditions in the cryptocurrency market are far from ideal. However, this is not the first time the niche has experienced something like this, so this situation is unlikely to destroy the industry. Yes, many projects will hardly be able to survive such tricks, but the most worthy and proven companies will not only survive the bearish trend, but also get to the next bullrun.
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