The year 2022 will go down in history as one of the most turbulent for cryptocurrencies. Since the start of the year, cryptocurrencies have started to experience small declines that have deepened over the weeks. If we take into account the level of the crypto market since the beginning of the year until today, we realize that the market has lost around 1,000 billion dollars.
This happened in a rather complex context for cryptocurrencies. Macroeconomic concerns are growing more serious and regulators are taking a closer look at cryptocurrencies, which could lead to more oversight and restrictions that will eventually affect how investors use cryptocurrencies as well.
And as if the above weren’t enough, what happened with the collapse of Terra was undoubtedly one of the hardest hitting events in the market. This reduction in a stablecoin caused the loss to accelerate and left the most important and virtually all cryptocurrencies quite low and in the red.
Also, on May 18 of this year, Gary Gensler, president of the Securities and Exchange Commissionparticipated in a hearing organized by the Appropriations Committee of the United States House of Representatives, during which he warned of the risks posed by cryptocurrencies.
He is particularly concerned that if stablecoins are falling and investors have already suffered huge losses, there is no real measure of what can happen with cryptocurrencies that are not stable and constantly fluctuating.
It should be noted that this is not the only regulator that has talked about cryptocurrencies in recent days. One of the most recurring concerns is that cryptocurrencies could affect traditional financial systems, which is why these entities are likely to start taking action very soon.
Is collapse imminent?
The question of the collapse of the cryptocurrency market is constant. This is a subject that has been discussed on different occasions and each time there is a drop in prices, we talk about it. On this occasion, the chairman of the Commodity Futures Trading Commission said on May 16 that he believed cryptocurrencies were going to crash.
He points out that at some point, cryptocurrencies will crash, generating huge losses for cryptocurrency investors. This will then spawn a “domino effect” in which traditional assets and markets could be affected. This undoubtedly raises concerns among regulators, which is why they have indicated that they will soon take preventive measures so that these conflicts do not develop.
Another who has a similar view is the US Treasury Secretary who believes that the sell-off in the cryptocurrency market could become more serious. And if that happens, it could spill over into traditional markets. In addition, he told the country’s Senate Banking Committee that digital assets can pose serious risks to the global economic structure and therefore there is a need to strengthen supervision, but it must be supervision. coordinated and not an isolated supervision, because what is sought is to protect the system and the investors.
These views have also become recurrent among Federal Reserve officials and other regulators who are certain that cryptocurrencies will fail. Also, some said this is not the first time they have warned about the issue, last year the Federal Reserve Bank President said in an interview that they should be cautious about buying cryptocurrencies because many of them have no value, so what happens and can happen was predictable.
Is there a chance of recovery?
In the cryptocurrency market, there is always a chance of recovery, even in the darkest times. Recently, the owner of Galaxy Digital said that 75% of cryptocurrencies will not succeed. Also, he has lost about $6 billion of his fortune since the crash started to register, but he remains optimistic about the use of cryptocurrencies.
In a letter to investors published on May 18, he assured that cryptocurrencies are not going to disappear because the crypto community is quite strong and resilient. He thus gave investors some hope for the future and said that this was only the beginning. And that it may be a tough time, but the recovery will eventually come and then prosperity will return to the market.