With the emergence of fears of the collapse of Evergrande with a ripple effect on the markets, Bitcoin and Ethereum have fallen below $48,000 and $4,100, respectively, in the past 12 hours. After the two largest virtual coins, the market cap of the broader crypto market is down 4.2 percent at $2.27 trillion over the past 24 hours.
Evergrande Group, the Chinese developer, was downgraded to “restricted default” on Thursday by rating agency Fitch over non-payment of overseas bond dues. According to a Reuters report, Evergrande’s failure to make $82.5 million in interest payments due last month would result in a cross-default on about $19 billion in international bonds and put the developer at risk of becoming China’s largest defaulter — a prospect looming over the world. The second. The largest economy in months.
Aside from Evergrande, other factors such as the uncertainty created by the new COVID-19 variant Omicron and fears of more Fed tapering leading to a slump in liquidity also contributed to the downturn in the cryptocurrency market. To give you an idea in the past seven days, the price of Bitcoin, the largest and oldest cryptocurrency setting the path for the broader market, is down 15 percent when trading at $48,207. Similarly, Ethereum, the second largest virtual coin, is down 9 percent and is currently trading at $4,122.
The CoinDCX research team stated that despite the store of valuable holdings that many associate with cryptocurrency, yesterday’s sale was a clear indication that the cryptocurrency is still being traded largely as a risky asset.
It wasn’t all bleak and gloomy though – “dinosaur” coins like XRP and $LTC are starting to show signs of recovery, with XRP notably out of its 4-month downtrend on the BTC pair. We have to see what price action will be towards the end of the year and with overall market sentiment remaining shaky, we could be in for a gloomy birthday in 2021,” the CoinDCX research team stated.
Cryptocurrency prices are affected by many factors including global economic conditions and cryptocurrency markets. Some of the factors specific to cryptocurrency markets include demand and supply, production (mining) cost of a specific asset, exchange listings, software/governance updates in blockchains, regulatory and legal updates affecting market sentiment, etc., said Minal Thukral, Executive Vice President- Growth & Strategy, at CoinDCX.
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Speaking to Business Today, Vikas Ahuja, a member of the Emerging Crypto Industry Authority Blockchain and Crypto Assets Council (BACC), and CEO of CrossTower India argues that several factors contribute to the volatility of cryptocurrency prices.
“Due to the developments surrounding the Crypto Bill in India, this has led to volatility in cryptocurrency prices on Indian exchanges but only for a few hours. In addition, the new alternative to Corona Virus known as Omnicron is disturbing the global markets, with its impact being felt in the Various markets, including those that trade cryptocurrencies.”
Similarly, Ashish Singhal, founder and CEO of crypto exchange CoinSwitch Kuber, notes that a combination of macroeconomic factors drive cryptocurrency price movements.
“There are many new projects also affecting the pricing of certain crypto assets. Our user base is dominated by retail investors. With news of a broader understanding of how India’s proposed crypto bill will focus on protecting the investor and ensuring that the stability of the financial system is enhanced, we are seeing positive interest among enthusiasts for cryptocurrencies.” He said.