Domino principe in crypto marketBINANCE:BTCUSDT
Let's start with what the S&P500 is.
The S&P 500 is a stock market index made up of 500 large companies whose total shares are traded on the New York Stock Exchange (NYSE) or NASDAQ.
The NASDAQ index - trades over 3,000 stocks. This exchange specialises in stocks of high-tech companies
I will not torture you with charts, but I will tell you why the classical stock market indices affect the cryptocurrency. Correlation of the cryptocurrency and stock market.
The S&P 500 and NASDAQ indices include stocks of technology companies, incl. crypto companies. For example, Coinbase Global , Riot Blockchain , etc. In other words, their indicator reflects the state of the entire sector of the economy.
Cryptocurrencies are highly correlated with US technology stocks, as they belong to the same class - risky instruments.
They are bought, counting on a strong price increase, and sold at the slightest signal of impending problems. And inflation and geopolitical uncertainty motivate to seek protection in safe-haven assets.
In April, the US reported inflation of 8.3% (money is depreciating, prices for goods and services are rising), the main reason is that they have printed too much money, the national currency has to be strengthened. All this immediately affected the stock and crypto markets. Bitcoin was the first to react. Based on this, we can build a chain of influence: world events / inflation > stock market > bitcoin > altcoin > panic around stables.
Panic is subject to the Domino principle. One event affects another, causing a chain reaction, and everything gradually tends to destruction. We will try to illustrate this principle.
Following the record crash of the $LUNA Terra token and its $UST stablecoin, increased volatility has been seen across all stablecoins. Someone, as usual, knew everything in advance. Back in April, there were many articles about how Terra has a weak algorithm and can easily play the death spiral scenario. The bottom line: “If the price of $LUNA comes under pressure, $UST holders may fear that the $UST peg is under threat and decide to buy out their UST positions. To do this, $UST is burned, and $LUNA is minted and sold on the market. This will further exacerbate the fall in the price of $LUNA, pushing more $UST holders to sell their $UST.”
There are many theories about the group of people behind this pressure. It boils down mainly to the fact that pressure is exerted in order to regulate the crypt. This is not so important. The trouble is that the system failed, and if this is possible within the framework of the "game rules", but it does not matter by what method this was achieved, it would have happened sooner or later.
Investigation to be! The US Securities and Exchange Commission (SEC) is investigating the decoupling of UST from the dollar. And in the United States, they pass a law on the regulation of stablecoins by the end of 2022.
The situation with LUNA put the strongest pressure on the market, $UST was shaking for several days until it completely died, the situation escalated, panic attacks seized all sectors of the market, the domino principle was launched.
USDT ≠ UST ?
What does stable mean? $USDT is backed by fiat dollar reserves and assets. Those. For every $USDT, there is a real $1 US. This distinguishes $USDT from algorithmic $UST.
Part of the securities backed by $USDT is related to the Chinese real estate sector, which is in crisis. If these securities depreciate, then the peg may lose the rate 1:1.
And this fear has been around for a long time, so Tether is reducing the share of commercial paper, increasing the share of the real dollar.
In February 2021, Tether agreed to provide reports as part of the settlement of allegations of covering up the loss of funds and lying about the state of the reserves.
As of March 31, Tether had assets of at least $82.4 billion, as well as $82.2 billion of liabilities related to the digital tokens it issued.
But this does not change the reasons for the shorts, because the specific sources of commercial paper have not been disclosed.
Do not forget that during a general panic, fear provokes fear, each event causes two more, all this grows exponentially, and someone is sure to profit from it, this is the golden law.
After analyzing the current situation, I can note a lot:
Stablecoins, not so stable. If not backed by real $, and even here you can bet.
You can’t panic, otherwise volatility is inevitable, and sometimes you can even make money on it.
Be vigilant, remembering that panic takes over everyone. At such times, risk is everywhere, analyze what you are doing and be careful.
A crisis is a difficult time, on the other hand, it is a time of opportunity.
Study what you invest in, these are market conditions.
The cryptocurrency market is directly related to the stock market. First of all, the stock market affects Bitcoin .
Is it really that bad?
Cryptocurrency has already experienced difficult times. The market cannot go up all the time, the current situation is quite natural. But it was at such times that the most significant projects of the sphere were born and developed on the market.
Collective panic cant strongly shake the market, any token and even shake $USDT. Don't despair, we are in the right place.
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