WEB3
by BSC News
October 3, 2022
Our financial market analyst Chung Yee says: Signs of market stress are showing as the U.S. dollar becomes a safe haven. Crypto is not immune to this trend.
The greenback continues to strengthen as traders and investors turn to the U.S. dollar as a safe haven, fearing that the U.S. Federal Reserve’s (Fed) interest rate hikes will persist. The strengthening of the U.S. dollar is causing dollar-denominated debts to cost more to service in local currencies. The relative decline of the British pound and Euro threaten to harm Europe’s financial stability.
Tightening liquidity has also significantly impacted the crypto market. Bitcoin ($BTC) is struggling to stay above $19,000 and the total crypto market capitalization has dipped below the $1 trillion mark. Market volatility will prevent traders and investors from holding on to risk assets.
If the world sinks into a global recession, troubled financial institutions and banks might collapse. In the short term, Bitcoin would tank because it is categorized as a risk asset. However, Bitcoin has an alternative narrative to consider. It was created as a result of the 2008 global financial crisis and was intended to serve as a hedge against conventional assets.
The market is far from entering a recovery phase. Volatility has abated since the 3AC and Terra fiasco. Projects are still struggling to stay afloat in the bear market as liquidity tightens. The crypto market does not exist in a vacuum and the global economic outlook has a strong influence on this asset class.
The Fed will eventually pivot from its current hawkish stance. Currently, the market is ripe for accumulation. Bitcoin still holds a strong narrative as a superior store of value and this narrative can play out in Bitcoin’s favor in times of crisis.
Whilst the price of Bitcoin has dropped considerably, its hashrate continues to climb, charting a new all-time high. The network’s security is now stronger than before and activities on the network did not decline.
Crypto regulation could be a savior for the crypto market. With the right legislation, institutions can onboard crypto assets as a hedge. Last Wednesday, Commodity Futures Trading Commission (CFTC) Chairman Rostin Behnam said in a fireside chat at NYU School of Law that Bitcoin could double in price in a CFTC-led regulation.
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