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- Bitcoin’s subdued phase in 2018 coincided with dull performance of the S&P 500 Index in the same year
- TerraUSD was one of the factors widely blamed by experts for the fall in Bitcoin price in May 2022
- How governments react to the crypto’s May crash might become clear in the coming month
CoinMarketCap tracks a total of approximately 20,000 cryptoassets, which is no mean figure for an asset class notorious for its high volatility. In May, bears gripped the crypto market and Bitcoin plunged below US$30,000, which had a deep impact on sentiments. For past several days, BTC has hovered near this level, with no sharp rise or fall.
What will June bring for Bitcoin? Will Bitcoin recover and pare losses? Or will losses widen? Nothing can be predicted with certainty. But by keeping tabs on the below-mentioned developments, crypto enthusiasts might be able to guess the trajectory.
It may be no coincidence that both S&P 500 Index and Bitcoin had a subdued year in 2018. Also, the pandemic-hit years of 2020 and 2021 were largely rewarding for both stocks and BTC.
The year 2022 has so far been a period of high inflation. Though inflation had seeped in much earlier, central banks were yet to react. And they finally did react in 2022. From Australia to Canada to the US, central banks have shifted their policy stance. In Australia, cash rate was hiked earlier this month to fight inflation. Stock markets in all these economies have reacted to this new scheme of things. Now, analysts are debating if there is a global stock market crash on the cards or is it just a cyclical correction.
Bitcoin is a variable return asset, just like stocks. From over US$47,000 at the start of this year, Bitcoin is now trading at under US$30,000. If inflation cools down and the wider market absorbs rate hikes in the near-term, Bitcoin might show some positive movement.
No doubt, Bitcoin’s price is prone to extreme fluctuations. But at least one category in the crypto world was designed with stable prices in mind. These were termed stablecoins and were pegged to an asset like fiat currency.
However, in May, this so-called stable category defied expectations. One of the biggest stablecoin assets, UST, lost its peg and came crashing down. This was quickly followed by a fall in most other major cryptos including BTC. Now, the Terra ecosystem has announced a new token, although with the same name LUNA. Some analysts are suggesting that the new launch might bring back some positivity.
Separately, Tether has recently launched a stablecoin pegged to the Mexican Peso. Other major tokens in the category have not behaved like TerraUSD. Bitcoin’s fall in May due to stablecoin category’s crash might become a thing of the past with the start of a new month.
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