As reported by CCN, the credit to the decline was given to the ICO-funded startups who cashed out their capital before the market would decline further by various analysts. The decline had affected ethereum much than the bitcoin.
According to Arthur Hayes, CEO, cryptocurrency derivatives exchange BitMEX, the VCs due to the state of panic will start moving out their ICO tokens and ether holding. Due to this, the prices of ethereum will decline further below $100.
A senior market analyst at eToro, Mati Greenspan, doesn’t agree to this as he says that the movement of cryptocurrency market is attributed to the fluctuating local currency values in emerging market. In his market commentary, which is available to CCN, he said that local currency values have been responding inversely to the strengthening of the US dollar.
The market value of currencies of emerging markets declined due to the USD breakout. As per Greenspan, there are signs that suggest this pullback spilled over into digital currencies which include spikes in blockchain activity. He also said that the fact is completely true that the digital currency holdings are increased by the investors in these markets in case of declining local currencies but still most of the investors across the globe choose dollar as the reserve currency.
In his market commentary, Greenspan wrote, “As the United States moves to tighten its economy and avoid strong inflation, they’re taking action that is strengthening the Dollar. Because the US Dollar is the global reserve currency, many smaller economies rely heavily on a stable exchange rate with the greenback.”
He further added, “So too, as the Dollar is being seen as a stable store of value at the moment, there really isn’t much incentive for people to store their money in digital assets.”
In an email statement to CCN, he said, “Over the course of this week, it seems that cryptocurrencies have been reacting negatively to the surging US Dollar. In this sense, they’ve been acting a lot like traditional commodities.”
His statement further read, “Usually, when the Dollar goes up assets like gold and oil go down in relation. Over the last week, both digital gold and real gold have fallen sharply in the face of the rapidly rising Dollar.”
Although, over the past few days, the dollar rally has hit a speed breaker, which has enabled currencies like Lira, Rand and Peso to recover some of their losses.
After a diving deep below $190 billion on Monday, the cryptocurrency market cap added nearly $20 billion due to USD pullback.
So why is bitcoin standing out from the pack, even as the overall cryptocurrency market struggles against a stronger dollar? It may be, to borrow a phrase from Fundstrat founder Tom Lee, because “bitcoin is the best house in a tough neighbourhood.”