Bust or BTFD? What the experts make of crypto’s red week
With the crypto market tanking it’s no shock that there’s something of a panic underway – and crypto being crypto, the chatter from the experts is mixed, to say the least.
Like some nightmare Hollywood legal case, it would appear crypto has crapped the bed and a lot of people and a lot of billionaires – like Binance chief executive Changpeng Zhao – have lost butt-puckering levels of wealth.
Among the market’s hardest-hit has been stablecoin TerraUSD, when the platform had to be halted and patched to prevent new players staking on it in the wake of its LUNA token crashing below 2 cents.
Terra creator Do Kwon announced a plan to rework the platform to back TerraUSD directly with collateral reserves rather than an algorithmic process, but the near collapse of LUNA has caused serious tummy troubles among altcoin gourmands.
This week however, the precipitous drops across the crypto sector seem to have slowed, with a number of commentators talking up a possible calming of the market as prices started to bounce.
Market flagship Bitcoin shuffled back from its early morning lows to move back towards the US$30,000 mark, with a few alt-coins joining what many will be praying is the beginning of the end of the bloodshed.
Among those looking to the stars for guidance is Tesla, which is reportedly exposed to the tune of more than 43,000 Bitcoins, acquired at an average price of US$34,000. At current prices, that’s about a US$172 million loss.
And let’s not forget El Salvador’s President Nayib Bukele, who splashed $US105 million of his people’s money buying BTC last September in the process of becoming the world’s first government to make it legal tender.
Why things have turned sour is up for debate, but YourPortfolio Managing Director Daniel Sekers is laying the blame at the feet of recent geopolitical events, and says the impact on the market is “likely to be short term and reactionary”.
“It’s worth remembering that this is the first real time crypto markets are being put to the test in a ‘market correction’ driven by economic and geopolitical forces,” Sekers said, adding that crypto is “an investment asset like any other that will have forces drive its liquidity just like any other, especially as mainstream investors start to adopt it”.
Ben Laidler, Global Markets Strategist at the social investing network eToro, is even more upbeat, posing the question that is on a lot of people’s lips: “Is now the time to get in while the going’s good?”
“We have seen such situations in the past, and the market could well rebound quickly or slowly (or not at all). Global retail investor ownership of crypto is already big, broad, and resilient to volatility,” Laidler says.
“A focus now is whether institutional investors, who have been slowly building positions in this new asset class, take advantage of current price weakness to step up their involvement.”
But what does it all mean for those of us who went ham on crypto during the pandemic and have been living lives of sweaty desperation this week while their moonshot splashed down somewhere in the Pacific? Or those who have watched their neighbours’ driveways fill up with Ferraris while their FOMO Ford Falcons rust quietly on the street?
Are folks going to raid the piggy bank and go in even harder, BTFD and get ready for crypto to stage yet another comeback? Google search data says the answer is most likely going to be yes.
The 12th of May saw global Google searches for “buy crypto” go through the roof, jumping by 102% as the world seemed to come to the same slow conclusion: A crypto plunge is only terrible if you’ve already got skin in the game – and the last time crypto went from circling the drain to a thriving market, a lot of people made a lot of money.
Whether an influx of new blood now prices are low will be enough to arrest the halt remains to be seen.