After a choppy session on Monday, bitcoin is back above $30,500 as of 11:40 GMT. It’s up from a 16-month low of $25,000, but remains below its week-ago levels of around $40,000. The cryptocurrency is on track for its seventh straight weekly loss. “Investor sentiment is fragile,” said Scottie Siu, investment director at crypto index fund manager Axion Global Asset Management.
Investor sentiment is fragile
While the crypto sector has suffered heavy losses this week, investor sentiment is still fragile. The loss of confidence in tokens pegged to the dollar has caused widespread selling of risky assets. The collapse of TerraUSD has also dragged crypto assets down. In addition, a decline in investor sentiment could lead to the collapse of many stablecoins, worth over $100 billion. A loss of confidence in these assets could have an existential impact on the entire digital-asset ecosystem.
Changes in technology affect cryptocurrency prices
Cryptocurrency prices fluctuate because of changes in technology. As the demand for cryptocurrencies increases, mining costs increase. Since many of these tokens are mainstream, their prices tend to rise as well. Most of these coins can be purchased on any cryptocurrency exchange. But the value of these cryptocurrencies is largely based on the value of privacy and anonymity to users. These factors should have wiped out some of their value.
SEC crackdown on crypto exchanges
The SEC has taken steps to regulate cryptocurrency exchanges, including the use of stablecoins. These currencies are pegged to commodities, like gold or silver, and they may be securities. That could be a serious concern for investors, as stablecoins may undermine the banking system and undermine public policy goals. This action has sparked an outcry that the SEC is stepping up its crackdown on the industry.
A recent crypto crash has provided several lessons. Not only are top altcoins vulnerable to overnight losses, but decentralized algorithm stablecoins also need a better strategy to avoid the same fate. For example, the centralized stablecoins often get flack for having insufficient cash reserves and look helpless during times of crisis. While that’s not the case with decentralized algorithms, they still need to develop a better strategy.
The SEC has ordered crypto exchanges to stop allowing new customers to purchase cryptocurrencies, and the Bitcoin price has dropped after this week’s hacking news. The hack also led to the devaluation of other digital currencies, including Litecoin, Zcash, and Dash, which are touted to provide more anonymity for users. But even with the latest developments, there are some signs of stability.