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Crypto Price Check: Is the Correction Over?

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Crypto Price Check: Is the Correction Over?

Crypto investors poking their heads out of the foxhole on Monday had just one question.

has it ended?

After last week’s carnage, cryptocurrency prices edged up over the past 24 hours, with the market estimated to have lost nearly $200 billion.

Fed’s role

Bitcoin was largely flat at $30,420.63 at the last check on May 23, according to data from CoinGecko. Ethereum fell about 0.5% to $2,067.33, while Dogecoin lost nearly 1% to $0.087630.

Last week’s crash came as stock prices tumbled and the stablecoin UST or TerraUSD and its token sister Luna crashed. Both are cryptocurrencies of the Terra ecosystem.

What is the problem now? Frank Corva, a cryptocurrency expert at Finder, believes the Federal Reserve can play an important role.

“Whether the crypto correction is over or not remains largely up to the Fed to do from here,” Corva said. “If the Fed continues to hike rates aggressively and remove $4.75 billion to $90 billion per month from its balance sheet starting in June, the crypto market may continue to feel the pain.”

However, Corva said that if the Federal Reserve becomes more dovish and does not take such substantial quantitative tightening measures, the cryptocurrency market could rebound.

“Crypto assets are generally not associated with stocks in risky markets,” he added. “In other words, in a risk-on environment, the price of crypto assets typically rises exponentially compared to growth stocks or tech stocks.”

However, Corva went on to say that in the safe-haven market, crypto assets have experienced a similar price correction as riskier traditional assets.

He noted that many high-growth tech stocks are trading down more than 50% from their highs, while bitcoin and ether are trading at about the same price.

Mike Novogratz, CEO of Galaxy Investment Partners, who lost millions in the cryptocurrency crash, said in a recent letter that “all investments take place within a macro framework,” Corva said.

Currently, this macro framework is being heavily influenced by the hawkish Fed policy that cryptocurrencies, as well as almost every other asset class, are subject to.

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Crypto analysts say the sudden price drop only adds to calls for more regulation.

Winston Ma, managing partner at CloudTree Ventures and author of “Digital Warfare – How China’s Tech Power is Shaping the Future of AI, Blockchain and Cyberspace,” said, “Increasing regulation in the U.S. and Europe could lead to cryptocurrencies Prices fluctuated further.”

European Central Bank (ECB) President Christine Lagarde said at the opening of the World Economic Forum in Davos, Switzerland, that cryptocurrencies “have no foundation” and should be regulated to prevent people from spending their lifetimes, Jack Ma said. Save up to speculate.

“Just two days ago, G7 finance ministers and central bank governors met to call for swift and comprehensive regulation of crypto assets,” Ma said. “Davos this week will see more cryptocurrency regulatory discussions among government leaders, and the U.S. will likely accelerate its stablecoin regulation in 2022, something that has been called for by Treasury Secretary Yellen for months.”

Blockchain and cryptocurrency companies have taken over the main streets of Davos despite a slump in cryptocurrency prices, according to Reuters.

According to Corda, the President of El Salvador, avid crypto enthusiast and the Central Bank of El Salvador recently hosted 32 representatives from different central banks around the world and 12 other financial institutions from other countries this week to introduce them to Bitcoin’s Benefits. The event has been dubbed “Bitcoin’s Davos.”

Last year, El Salvador became the first country to make bitcoin legal tender.

Bigger trends in regulation

David Lesperance, managing partner of immigration and tax advisors at Lesperance & Associates, said he believes “the larger trend in regulation is to clear out a lot of cryptocurrencies and NFTS that don’t get through in a regulated environment.”

“The impact of the TerraUSD/Luna debacle continues to reverberate. The focus now is on the standards crypto exchanges use when listing new cryptocurrencies and continuing to trade disgraceful coins previously listed,” he said.

Intense competition among exchanges has led to a dramatic increase in the number of tokens available on the platforms, which are popular with adventurous but naive investors, Lesperance said.

“Major exchanges including Coinbase, Binance, OKX and Crypto.com previously allowed their customers to buy Terra or related tokens, but stopped trading during the crisis,” he said. “Most jurisdictions have few legal standards on which crypto tokens can be publicly listed for the average person to trade, so exchanges play a key role in scrutinizing tokens.”

Lesperance said the scrutiny of the standards that exchanges apply when they decide to list tokens comes as the strategy of adding more tokens to drive growth shows signs of faltering.

“So far, it’s just the exchange’s decision, but hopefully regulators will move quickly to implement the new standard … and the responsibility for failing to meet that standard,” he said.

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