On Monday, May 9, the cryptocurrency market started falling down like a waterfall as bitcoin declined to ~$30,000, losing over 53% since its all-time high back in November 2021. Given it's far from the first time the crypto market is going crazy, here're top 3 versions of why it all happened again:
High correlation with the Fed
As the Federal Reserve brings rate hikes to tame inflation, Wall Street is increasingly dumping stocks, bonds, and... bitcoin. Analysts at Glassnode, a blockchain firm, say the largest cryptocurrency by market capitalization is now too much correlated with "macroeconomic shocks and tighter monetary conditions" as more institutional capital enters the space. The company said:
Bitcoin remains highly correlated to the broader economic conditions, which suggests the road ahead may unfortunately be a rocky one, at least for the time being.
In the meantime, Santiment, another blockchain firm, noted that the crypto community's sentiment has fallen to six-week lows.
Moreover, traders on Monday deposited over 40,600 BTC, which is the largest spike since December 2019, the firm noted. The inflow comes after bitcoin's average profitability levels hit "the most negative since late January."
Nothing to see here
American billionaire Mark Cuban doesn't share the market's panic as he believes that cryptocurrencies are going through "the lull that the internet went through."
He added that the crypto space is overwhelmed with ideological copies, calling for blockchain networks to stop reproducing the same products over and over again. He said:
The chains that copy what every one else has, will fail. We don't need NFTs or DeFi on every chain. We don't need bridges to move NFTs between chains (does this make it fungible?). We need Smart Contract apps replacing SAAS [software as a service] apps.
Cuban also believes that only those blockchains that can bring the true potential of smart contracts to improve business productivity and profitability will eventually survive on the market.
Read also: Wikipedia editors say no more bitcoins