While explanations for what caused this crash, one of the main reasons was that a main Chinese real estate company, The Evergrande Group could default on its debts, which could weaken the world’s second-largest economy. One main development that stood out was that cryptocurrencies seemed to move in the exact same direction as more traditional markets, which hasn’t always been like that. Did this phenomena cause the Crypto Market Crash?
An Analysis of the Crypto Market Crash
Some analysts discussed this situation, offering different opinions:
- Joe DiPasquale, the founder of BitBull Capital, stated that the influx of institutional investors made the markets become more and more correlated. They are increasing as the pool of market participants across the crypto market becomes more standardized.
- Tim Enneking, director of Digital Capital Management, had a similar approach, saying that cryptos are more correlated to fiat because more investors in fiat are now investing in crypto.
- A no-risk attitude is not a characteristic of only one type of asset. When investors start worrying, they get rid of everything.
- There is no reason for this correlation. If fiat markets hold up or decline, investors will start looking for a return. Many will find also that return in cryptocurrencies.
- The cryptocurrency market will follow the fiat markets down. They also reverse much sooner because there is no fundamental reason for their decline.
- The Evergrande situation is a clear example of a capitalist economy. It is not the company that causes the fall, but what that company represents. Therefore, today’s events will be positive for cryptocurrencies.
- Vinny Lingham, the co-founder of Civic, offered his opinion on the price fluctuations. When markets are disturbed, liquid assets get affected as we saw at the beginning of the covid pandemic.
- Pat White, the cofounder of Bitwave, emphasized that digital currency markets integrate in the global economic events. What we can learn is that we must take into account that the crypto market is worldwide, much more than other assets are.
Conclusion – Market Crash Summary
Tokens are surprisingly exposed to various markets and nations. If you come to crypto with a US-centric view, you will be surprised in moments like these when something that has nothing to do with the US affects the market in a massive way.
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