The cryptocurrency market is currently experiencing one of its toughest times in recent years. What is happening is an unprecedented event that leaves investors with their backs to the wall, but also a lot of other questions to answer.
So far it is clear that the market has been very affected by what happened with Terra, which is supposed to be a stable cryptocurrency pegged to the price of the dollar, but the cryptocurrency has fallen to 18 cents. To this was added the collapse of Luna which left the market in the red and with many concerns.
At this point, it is safe to say that we are witnessing a major crypto crisis. Before that, although cryptocurrencies did not have the best year, they had moments of some stability that allowed investors to rest easy and not sell their holdings, but now everything has changed and the crisis has reached the market and one of the questions that has caused the most concern in recent hours is whether the cryptocurrency crisis could also affect the global economy.
Right now the market is going through a pretty tough time. This situation obviously affected investors of all levels. A few days ago, market cryptomillionaires were said to have lost billions of dollars, but little is said about smaller-scale investors, retail investors who, in many occasions, bet on cryptocurrencies to protect themselves from inflation or to carry out transactions.
This week we witnessed the collapse of one of the parts of the cryptocurrency market that seemed to be one of the safest and most stable. Although the cryptocurrency that suffered the crash was not the most important in the market, what happened to it and the fact that it got out of sync with the value of the US dollar is what destabilized the market and surprised a lot of people because something like this shouldn’t happen.
In theory, stablecoins are just that, stable, and so their value is tied to a fiat currency like the dollar. In this case, many people have trusted stablecoins much more than decentralized cryptocurrencies due to their high levels of fluctuation, but now it seems that even stablecoins cannot be trusted with certainty.
For different analysts, this situation has made the crypto industry regress in advances such as the recognition it had received by people, the confidence that many people and investors of different levels have placed in these currencies and can cause the collapse of the global market. If in the past few days alone the global market has suffered a trillion-dollar loss, what lies ahead could be far more serious.
Could the collapse affect the global economy?
At last year’s G7 meeting, one of the topics discussed was currency stability. At the time, some big countries pointed out that stablecoins could be quite dangerous, but nobody took it seriously, precisely because stablecoins were stable and the risks they presented were tiny and almost non-existent.
Now, almost a year after that meeting, it seems that the countries that were opposed to this type of cryptocurrency were much more right than we all thought. At the time, there was talk of the possibilities of falling cryptocurrency prices and how that could directly affect the traditional economy, and those fears seem to be becoming more and more real.
At this point, it is uncertain whether the cryptocurrency market crash could affect the global economy in the medium to long term, as this is all still quite recent. What we can say is that the economies of countries like El Salvador, which recently approved bitcoin as legal tender, could face a major crisis due to the amount of assets they have purchased from high prices in the past.
Although we cannot say if and how this will affect the global economy, this possibility is always present. The cryptocurrency market has grown so big over the years that at this point, what happens to the market will also have some impact on the economy. That’s why it’s likely that regulators will soon get a little tougher and impose measures against the market to protect against situations like this.
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