A few thoughts on the causes of the BTC flashcrash and related risks
Cryptocurrencies have dropped from their highs over the past month and Bitcoin's price has dropped nearly $ 20,000 over the past 10 days, only to recover somewhat.
With a cool head, we must distinguish between short-term causes and structural factors.
In the first we put the news on the confirmation of the Chinese ban on the trading of virtual currencies, accompanied by the increasingly widespread desire to set regulatory limits on the use of these tools. India even, right now, plans to ban cryptocurrencies and fine anyone who trades or holds digital assets. Another recent downside: Tesla stopped accepting Bitcoin as payment for vehicles on May 12th and this had a strong media impact.
Is the largest market downturn on Wednesday linked to the cryptocurrency carnage?
But these were only the superficial reasons. In general, global investors are increasingly concerned about inflation. Advances on the minutes of the FED yesterday, Wednesday, created a considerable nervousness among operators because they hinted at a change in attitude.
If the Fed scales monetary stimulus earlier than expected, as suggested by the minutes, this could lead to higher interest rates. Higher interest rates make risky assets more expensive and this was noted not only with virtual currencies, but also with the stock market which, in fact, plummeted in the first half of the US session.
If I have to reduce the risk profile what can I download if not the riskiest activated, ie virtual currencies. Therefore these have been victims of a rebalancing of the risk profiles of institutional investors as well. The decline also affected technology stocks, such as Tesla, and also affected the more speculative ones, such as Tesla, which lost 3%.
Anyone who owns BTC or other virtual currencies for a longer term, that is, since 2109, is still making excellent profits and will hardly get out of it. Could it be the time to "Buy the minimum"? Yes, but only if you are below your personal BTC investment target, at the level of a very few percentage points of the portfolio and aware not only of the currency's own risk, but also of that linked to not being able to own operate: at the height of the flashcrash the major exchanges were unable to guarantee all access.
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The article Some thoughts on the causes of the BTC flashcrash and related risks comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/qualche-pensiero-sulle-cause-del-flashcrash-di-btc-e-dei-rischi-collegati/ on Thu, 20 May 2021 06:00:06 +0000.