Jamie Burke, chief executive of crypto venture fund Outlier Ventures, says the crypto is just like stocks and that the two are moving because the boundaries between them have blurred. Vertiginous price peaks and the hectic noise around cryptocurrency have sucked in a lot of new money as institutional and retail investors spend their stimulating money on the Robinhood stock trading platform. “Digital assets have begun to connect with the wider macro environment,” Burke said. “There’s a lot of money that went into the financial system: they started using it to speculate, and so the crypto definitely took advantage of that. But similarly, when the wider macro environment changes, you see that this has a negative effect on digital assets.
“I also think that crypto can enjoy more extreme peaks with good news and extremely low levels of bad news. For example, if Russia is declared at peace, I think the crypto will be pumped. Why? It doesn’t make any sense, but it probably would, “he said.
Another way to look at it is that crypto has never been a hedge against inflation – or anything, in that sense. Instead, it has always been imperative to become another part of the wider financial ecosystem. Sam Doctor, chief strategic officer at BitOoda, says crypto is now being used as one of many possible “risky” assets. People who are looking for a place to park their capital and who have probably already invested in the shares of high-risk technology companies would naturally move up the ladder to bitcoin and then to more obscure crypto assets. “At interest rates close to zero, the market essentially said, ‘Let’s go ahead and take some risk, it’s all right,'” says Dr. Now that interest rates are rising and inflation is biting, crypto is the first thing to be thrown out of the wallet, he said. “This is the only time we’re actually looking at bitcoin and wondering if it’s really hedging inflation. And the answer the markets tell us is no.
But one can only blame the general macroeconomic conditions and stock market turmoil to influence the downward trend of cryptocurrencies. Part of the pain is undoubtedly self-inflicted. Look at the disintegration of Terra LunaAn “algorithmic stablecoin” project, the value of which is also believed to be pegged to the dollar, which lost almost 99 percent of its value in May, smashing $ 42 billion of money to investors in the process, according to forensic cryptocurrency company Elliptic. Terra’s dollar parity relied on economic incentives and code, not hard money. This mechanism, economists said, could not work, except for the ever-increasing demand for the asset. When people began to withdraw en masse, the currency collapsed. (Terra’s founder, Do Kuon, did not respond to several interview requests.) Celsius, which had a significant investment in Terra, is now dealing with liquidity problems and stopped all withdrawals over the weekend. (Celsius executives did not respond to emails, texts, or voicemail messages.) In other words, in the last few years, while the moving market, full of cash, has been looking for new places to pour money, schemes , which have weak economic fundamentals attracted capital – until the tide turned.