Cryptocurrencies, especially Bitcoin and Ethereum, are now falling after recently reaching their all-time highs. The sudden change in direction is partly due to the rising value of the US dollar. Currently, the record liquidity level and heavy whale trading activities in Ethereum have fallen to the lowest since early 2020. Global market capitalization has slid to 3.4%, settling at the $1.75 trillion level.
The major cryptocurrencies are the main victims of recent losses. Bitcoin has now fallen by 4.5%, ranging within the $54,000 level. Ethereum even performed worse, plunging by 5%. This is partly because the amount of Ethereum now available on centralized exchanges has bottomed to a 19-month low, as tweeted by Glassnode.
Ethereum recording record low activities
Besides, the total number of addresses that hold above 100 coins is at its 19-month low, just 45,518. In addition to the above, liquidity droughts have been recorded on WBTC and DAI markets, indicating that traders may be getting ready to buy when the price hit bottom or waiting carefully for another volatility to occur before entering the market the long-term gains. Meanwhile, some cryptocurrencies are exempted from the general market losses. One of the lucky ones is Ripple, which rose by 10% over a call that the ban on it be lifted.
In the same vein, Uniswap rose by 5%, while Theta climbed by 12%, making it the first time it would be joining the list of top ten cryptocurrencies. Europe is now witnessing a new wave of COVID-19, as it seems there is no sign of recovery yet, and people might have to wait for some months. What is the effect of this on the crypto market? This will be determined by Bitcoin’s ability to sustain its growth prospects to investors.
Reasons for the recent slide in prices of cryptocurrencies
The question is, why is the crypto market experiencing a downward spiral? What is the correlation between the price of the USD and cryptocurrencies? It appears the continuous rise in the USD is largely affecting the price of cryptocurrencies negatively. The US economy’s rapid recovery is boosting the safe-haven status of the US dollar, as the greenback is rising fast against other major currencies such as the Euro, Pound, and the Japanese Yen. Added to that is the rush for the USD when the Turkish lira witnessed a sudden slide of 15% on Monday.
Looking at it from the historical perspective, whenever the dollar falls, Bitcoin rises. This correlation occurred last year. Aside from that, the ongoing trade war between the EU, US, and China also influence investor sentiment. If this correlation continues, Bitcoin may find it difficult to flourish because apart from being a growing exotic asset, it attracts investors only when they think nothing else is working. Meanwhile, on Wall Street, the giant tech stocks were all strongly bullish, courtesy of a correction seen in the Treasury yield rates.
Apple climbed by 2.8%, while Microsoft saw a rise of 2.4%, and Tesla rose by 2.2%. On Monday, value and growth stocks kept moving in a range. Tech stocks made considerable gains. Travel and airline firms, which had been rising for the past few weeks with the optimism that the global economy was now recovering, declined on Monday when it turned out that the COVID-19 pandemic is yet to end.