New Delhi: The cryptocurrency market is facing an unprecedented dip. On Friday, Bitcoin price fell below $26,000 for the first time in 16 months and the overall market lost over $200 billion in a single day. Following the ‘de-pegging’ of TerraUSD (UST), LUNA crypto price dipped around 97 percent below its all-time peak of $118. Under this backdrop, CoinSwitch Kuber CEO and Co-Founder Ashish Singhal tried to quell the sudden panic among investors and said he remains “bullish about the industry’s ability to innovate and create value.”
Crypto crash: Why is the cryptocurrency market crashing?
Singhal took to Twitter to offer his take on why the crypto market is seeing a major crash. He said that a lot of factors have played a hand in the market’s latest plunge. “The current market behaviour is a combination of several developments: High inflation, US Fed interest rate hike, broader capital outflow from asset classes, Ukraine war, dark clouds over algorithmic stablecoins… the downward pressure is immense,” Singhal tweeted.
Getting a lot of questions about the crypto market. While it’s hard to predict which way things will move in the short term, in the long term I remain bullish about the industry’s ability to innovate and create value.
— Ashish Singhal (@ashish343) May 12, 2022
As per CoinMarketCap data, the global crypto market cap stands at $1.29 trillion at the time of writing. While this marked an increase of 8.05 percent over 24 hours, it is still more than half of where it stood in November last year.
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“The fall is not limited to crypto,” Singhal said. “Bitcoin has moved nearly lockstep with Nasdaq tech stock. The correlation is at an all-time high. Correlation between asset classes is not ideal. Yet, this tells us the fall is not signalling a fundamental weakness in any asset but simply the broader economic sentiment and the nature of capital flow. We’re also likely coming off of a multi-year bull run across asset classes.”
Singhal also referred to the ‘de-pegging’ of TerraUSD earlier this week, which is largely believed to have caused the plunge among most leading cryptocurrencies. UST has ‘de-pegged’ to $0.45 from its value of $1. This marked a drop of about 55 percent. Since both UST and LUNA are interlinked, the massive drop in UST value also resulted in LUNA’s overall drop.
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Singhal said that UST’s recent dip “is a significant test of algorithmic stablecoin’s ability. Terra’s de-pegging and its future will be closely watched.”
Crypto crash: What should investors do now?
Singhal advises investors to be cautious and shouldn’t follow others blindly. “Your actions should follow a sound assessment. Don’t buy because others are. Don’t sell because others are. Do your own research,” Singhal said.
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“Understand the nature of each asset. Markets go up and down. Every time the S&P 500 has risen 20 percent or more for over a year, it has corrected some of those gains. When it comes to investment, no amount of information is too much. Stay informed, stay safe.”