South Africa-based cryptocurrency exchanges are seeing a surge in transactions after the Bitcoin price plummeted.
As volatility in crypto markets continues, the value of Bitcoin – the world’s most popular digital currency – recently fell below $31,000 (R479,000), less than half of what it was at its highest level in November last year. .
With the price of Bitcoin falling, local exchanges are pointing out that first-time buyers see this as an opportunity to dip their toes into the crypto world.
They add that the drop in price has seen some panicked investors rush to sell their crypto assets.
“Usually large increases and decreases in crypto prices lead to increased transactions, which we see on Luno,” Marius Reitz, Luno’s managing director for Africa, told ITWeb via email.
“On average, we are seeing an 8% increase in new customers and a 10% increase in first-time crypto customers – these can be people who have opened wallets (accounts ) and waited for the price to drop. We find that many customers are monitoring the price, as they set up price alerts on Luno. »
According to Reitz, since the first week of May, just before the sharp price drop, Luno has seen an 18% increase in active customers, with some selling crypto and others buying the drop.
He notes that trading volume on Luno increased by 120% in the first and second week, when price volatility was at its peak.
“To put that into perspective, in March 2020 when the market fell on news of the COVID pandemic, there was a 60% increase in volumes on Luno.
“Bitcoin saw the most trade, growing 150%, followed by Ethereum and Ripple. Both Ethereum and Ripple were up 100%. Volumes doubled from $10 million to $20 million on each.
Similarly, David Porter of AltCoinTrader claims that the crypto exchange has seen a surge in trading volumes associated with the price action.
“Essentially, this means that if there are ‘panic sellers’, there are definitely plenty of ‘bargain hunters’ looking for a good price entry point, or for those looking to reduce the average cost of their wallets,” Porter says.
He points out that as an exchange, AltCoinTrader does not provide investment advice and that each investor should do their own research and have a thorough understanding of their own risk appetite and tolerance levels.
Nonetheless, he points out that while historical price action is not an indication of future price action, some of the best buying opportunities for Bitcoin have traditionally been when prices approach the 200-week moving average. .
According to Jonathan Ovadia, CEO of Ovex, “Investors should look to buy Bitcoin at these prices, although if this bear market persists, prices could decline over the next 12-18 months. Over the long term, investors could see great returns buying at these low prices. »
He thinks that in the short term, prices are unlikely to recover, but there is a good chance that prices will recover in the medium to long term.
“In risky times like these, it is better to hold larger cap coins, such as Bitcoin and Ethereum, as they have stood the test of time.”
Farzam Ehsani, CEO and co-founder of VALR, acknowledges that Bitcoin and crypto, like all other asset classes, have lost ground against the dollar over the past few weeks and months.
“We are looking at a macroeconomic backdrop of uncertainty regarding the state of the economy, as well as the monetary policy of the Federal Reserve and other central banks around the world.
“Inflation has been on the rise and the prospect of containing that inflation by tightening monetary policy means that there will be less liquidity in the financial system and interest rates are expected to rise.”
When that happens, Ehsani says the dollar strengthens. “Despite Bitcoin’s retracement of more than 50% from its all-time high, many still view Bitcoin and certain other cryptocurrencies and inflation hedges at the current price as a potential entry level.
“Of course, crypto will continue to be volatile and prices could fall further, so individuals and institutions should assess their risk appetite for this volatile asset class.”
Luno’s Reitz explains that Bitcoin has gained 9% over the past week, breaking above the critical resistance level of $31,500.
He notes that it remains to be seen if this holds up, as bear markets typically see many such bounces before coming back down. It outperformed most crypto markets in May, and its dominance has fallen from 42.5% at the start to 46.7% currently, indicating that altcoins in general are underperforming Bitcoin, he adds. .
“US stocks also rallied towards the end of last week, followed by Bitcoin, so traders are likely watching stocks closely to determine the next direction for the crypto as well.”
He adds that Bitcoin has fallen significantly over the past few weeks, alongside the fall in financial markets.
“On May 9, global equities suffered their worst one-day decline since the outbreak of the coronavirus pandemic in 2020. The initial plunge did not appear to be due to any specific catalyst, but analysts were pointing to growing pessimism at about the state. major world economies.
For Porter, there are two main driving factors behind Bitcoin’s recent price action; the first being the actions taken by the US Federal Reserve to raise interest rates in the face of high inflation and market instability.
He says the second driver was the virtual implosion of a stablecoin called TerraUSD. “A stablecoin, as the name suggests, is believed to have stable value because the tokens are pegged to the value of a currency such as the US dollar.
“In the case of TerraUSD, its peg to the US dollar was algorithmically backed by a network of arbitrageurs, who buy and sell Terra’s volatile cryptocurrency governance token, LUNA. TerraUSD broke away from the US dollar, leading large LUNA holders to burn their tokens in an effort to retain the US dollar peg.
“As a result, LUNA lost 99% of its value. This extreme market volatility, which has affected a well-known stablecoin, has severely affected market confidence and even confidence in other unrelated stablecoins,” Porter concludes.
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