Ethereum Joins The Crypto Plunge: The Second Largest Digital Currency Loses 20% Of Its Value In 24 Hours

The world’s second largest cryptocurrency, Ethereum, has joined the cryptocurrency crash – its value has fallen 20% in the past 24 hours – as the digital currency slowdown hammers investors who bought during the Covid years.

Cryptocurrencies have fallen sharply in value over the past few days as fears for the global economy spread and investors begin selling risky assets.

However, investors in more traditional stocks are also suffering, with US tech stocks also plunging in recent weeks, including Amazon which has fallen 30% in a month.

Many amateur investors took to buying stocks and digital currencies during the Covid pandemic and made money because values ​​generally rose in a so-called bear market.

Ethereum has now lost more than half its value this year, Bitcoin has lost a third of its value since January and Luna with 98% of its value wiped out overnight with suicide hotlines pinned on the Reddit page currency accordingly.

Popular digital currency exchange Coinbase has warned users they could lose all their money if the company goes bankrupt – after the downturn sent its share price down 27%.

WHAT ARE CRYPTOCURRENCIES?

A cryptocurrency is a digital currency that can be used for online transactions.

It’s the Internet’s version of money – unique pieces of digital property that can be transferred from person to person.

All cryptocurrencies use the “blockchain” and only one can be created and shared using specific agreed rules. For each cryptocurrency, the rules are slightly different.

People can buy bitcoins through exchanges such as Coinbase and Bitfinex.

Bitcoin was the first cryptocurrency, created in 2009.

Other currencies such as Litecoin and Dogecoin do the same but have slightly different inflation levels and rules surrounding transactions.

Currently, around 270,000 transactions take place every 24 hours.

These currencies do not exist as physical or digital objects. It is simply a collective agreement with other people on the network that your currency has been legitimately “mined”.

Blockchain is the record of changes in ownership of a currency that is broadcast through the network and managed by computers around the world.

The network works by harnessing the greed of individuals for the collective good.

A network of tech-savvy users called miners keep the system honest by pouring their computing power into a blockchain, a global tally of every bitcoin transaction.

As long as miners keep the blockchain secure, counterfeiting shouldn’t be a problem.

However, because cryptocurrencies allow people to exchange money without a third party getting involved, they have become popular with libertarians as well as techies, speculators, and criminals.

During the pandemic, historically low interest rates intended to stimulate economies led investors to buy riskier assets like cryptocurrency with higher rates of return.

As soaring inflation drives interest rates higher to protect savings, these assets are being sold off in favor of safer government bonds – which will offer better yields.

The Bank of England raised interest rates by 0.25% to a 13-year high of 1% on May 5.

The Federal Reserve also raised interest rates to 1% on May 4, with further hikes expected to fend off the worst effect of inflation.

The NASDAQ saw its biggest one-day drop since June 2020 earlier this week and the crypto hit implies growing integration between the crypto and traditional markets.

The index, which includes several top tech companies, ended May 5 at $12,317.69, with shopping sites such as Etsy and eBay leading the fall.

Both companies saw their values ​​drop 16.8% and 11.7% respectively, after announcing earnings estimates that fell below expectations.

Previously high-flying tech stocks have started falling dramatically in recent months, fueling fears of a broader economic crash and making investors less likely to buy assets.

Elon Musk’s Tesla fell 36% last month amid news of the quirky CEO’s attempts to buy Twitter.

The electric car maker is now trading at £600, down dramatically from £937.69 a month ago.

Delivery giant Amazon has seen its price drop by 30% since April 11, with stock hitting £1,725.19 today, down from £2,468.75 from £2,468.75.

The fall in these stocks is fueling fears that the “dot.com bubble burst” of the early 2000s is about to repeat itself.

In the late 1990s, increased access to computers and the Internet led to large-scale speculative trading in Internet companies.

The interest has resulted in a very high valuation of companies with a “.com” suffix.

After the US Federal Reserve raised interest rates following the end of the 1990s boom, speculative trading plunged and caused the dotcom bubble to burst, sending values ​​plummeting.

The volume of business done by crypto exchanges, which hold the “blockchain” ledgers that record transactions, is already down sharply.

“The crypto selloff was driven by the discouraging macro backdrop of rising inflation and interest rates which sent shockwaves through the tech sector, dragging cryptos with it, confirming that Bitcoin and others serve no purpose as an inflation hedge,” said Victoria Scholar, chief investment officer at Interactive Investors.

Luna lost its peg to the dollar this week, falling below $1 per coin, causing prices to plummet dramatically as the industry panicked (similar to a run on a bank).

“The Terra incident is causing panic in the industry, as Terra is the third largest stablecoin in the world,” said Ipek Ozkardeskaya, principal analyst at Swissquote Bank.

But TerraUSD “could not deliver on its promise to maintain a stable value in US dollar terms”.

The crypto downturn has wiped over $1.5 trillion of value from the markets, but investors are still hopeful that prices can recover like they have in the past.

However, unlike previous crashes, experts believe this latest price drop could prove permanent due to wider fears over the global recession.

Bitcoin reached a high of £16,194.81 on December 17, 2017 before falling below £9,000 five days later, losing nearly 45% of its peak.

The price returned to pre-crash levels in November 2021.

The slowdown has led Coinbase, an online trading platform, to issue a stern warning to customers: your crypto is at risk if the exchange goes bust.

According to the official Coinbase website, the company has over 98 million verified users. It is the largest cryptocurrency exchange in the United States.

Coinbase CEO Brian Armstrong tried to calm shareholders down in a series of tweets, one of which read, “Your funds are safe at Coinbase, as they always have been.”

Despite Armstrong’s claims, in a filing with the SEC, the company referred to customers as “unsecured creditors” in the event Coinbase goes bankrupt.

This means that customer crypto assets would be considered Coinbase property by bankruptcy administrators.

The SEC filing, Staff Accounting Bulleting 121, requires crypto platforms to include client crypto holdings as assets and liabilities on balance sheets.

Armstrong wrote on Twitter that the company was at “no risk of bankruptcy” despite the filing, which he said was made to bring the company into compliance with SEC regulations.

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Ethereum Joins The Crypto Plunge: The Second Largest Digital Currency Loses 20% Of Its Value In 24 Hours


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