31.7 C
Brunei
Saturday, August 13, 2022
31.7 C
Brunei
Saturday, August 13, 2022
More
    - Advertisement -
    - Advertisement -

    Crypto investors’ hot streak ends

    NEW YORK (AP) – The wealth-generating hot streak for bitcoin and other cryptocurrencies has turned brutally cold.

    As prices plunge, companies collapse and scepticism soars, fortunes and jobs are disappearing overnight, and investors’ feverish speculation has been replaced by icy calculation, in what industry leaders are referring to as a “crypto winter”.

    It’s a dizzying turn of events for investments and companies that at the start of 2022 seemed to be at their financial and cultural apex. Crypto-evangelising companies ran commercials during the Super Bowl and spent heavily to sponsor sports arenas and baseball teams. The industry’s combined assets back then were estimated to be worth more than USD3 trillion; today, they are worth less than a third of that. Maybe.

    On Monday, the price of bitcoin traded at USD20,097, more than 70 per cent below its November peak of around USD69,000. Another leading cryptocurrency, Ethereum, was trading near USD4,800 at its November peak; it is now less than USD1,000.

    Bitcoin and other cryptocurrency prices have been sliding all year, a decline that accelerated as the Federal Reserve signalled that interest rates would be moving higher to try and snuff out inflation. What is happening to crypto is, in part, an extreme version of what is happening to stocks, as investors sell riskier assets at a time when the threat of recession is rising.

    An advertisement for Bitcoin cryptocurrency on a street in Hong Kong. PHOTO: AP

    But the crypto sell-off is more than that, experts say; it signals growing trepidation on Wall Street and Main Street about the industry’s fundamentals, which right now are looking shaky.

    “There was this irrational exuberance,” said Mark Hays at Americans for Financial Reform, a consumer advocacy group. “They did similar things leading up to the 2008 crisis: aggressively market these products, promise returns that were unreasonable, ignore the risks, and would dismiss any critics as folk who just didn’t get it.”

    Hays and others are also drawing comparisons to the 2008 housing-market meltdown because the collapse in bitcoin and other digital coins has coincided with crypto industry versions of bank runs and a lack of regulatory oversight that is stirring fears about just how bad the damage could get.

    Unlike housing, the crypto industry isn’t large enough to trigger major turmoil across the wider economy or financial system, analysts said.

    - Advertisement -
    spot_img

    Latest article

    - Advertisement -
    spot_img