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Economist Manukyan explained the real problem with cryptocurrencies: this crash is very different from the previous one

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According to international markets expert Shant Manukyan, who says cryptocurrencies are now starting to move with standard markets, unlike in previous years, the main problem is the suspicious nature of crypto funds and stable coins.

Photo: Reuters

In mid-May, the cryptocurrency TerraUSD in value ‘to collapse’ Celsius Network, one of the largest cryptocurrency lenders, on June 13, after rocking the cryptocurrency market ‘extraordinary market conditions’ announced that it has suspended all operations due to

After these developments, the price of the largest cryptocurrency Bitcoin, albeit temporarily, fell below $ 18,000 for the first time since December 2020, then recovered a little and climbed above $ 19,000.

The latest drop in the cryptocurrency market came after the week of the highest decline in the last two years in percentage terms, between rising interest rates in the US stock market and rising risk of recession in the economy.

World writer Shant Manukyan wrote that the only dynamic in the recession in 2017 was cryptocurrencies themselves, but after a period of significant growth, the cryptocurrency world has formally transformed into a standard financial market.

Stating that cryptocurrencies are perceived as a high-risk investment tool, he has begun to act alongside technology exchange Nasdaq, Manukyan said they have been most affected by the Fed’s steps as these stocks are more sensitive to rate hikes. interest. This effect has also begun to be seen more severely in crypto assets.

However, the continuation of this correlation despite rising inflation has created question marks for Bitcoin, which is advertised as a hedge against inflation.

Manukyan is about this process. “Despite the (Fed’s) balance sheet contraction that began in June, gold managed to hold above $ 1,800, while the very severe depreciation of Bitcoin caused the deactivation of one of the important investment stories.” he wrote.

‘Frustration’

Stating that what has happened so far can be seen as one of the normal market stories, Manukyan said the main problem with cryptocurrencies this time around is Bitcoin’s disappointment with inflation based on sales, or the switch of Ethereum. from PoW to PoS (described as printing coin money) believes there is no transition to the process.

‘The main problem is the structure open to doubt’

The main problem, according to the market expert, is the questioning of the functioning of funds and stablecoins specific for cryptocurrencies and their suspicious nature.

Professional fraud in the 2008 credit crisis ‘high product and yields’ Stating that it was done under the name of Manukyan, he states that a similar situation is now being seen in the world of cryptocurrencies: “Excessive leverage, unsecured assets, unsecured loans, unpaid rates of return in the real world, products that were never allowed by any capital market council, but were issued by exploiting loopholes …”

“No central bank”

According to Manukyan, a drop in a single stablecoin also causes all dominoes to drop. Here, unlike traditional financial markets, the absence of a central bank to provide liquidity during the crisis causes the markets to destabilize. Furthermore, in addition to stabilizing, this decline also disrupts the capital structure of healthy institutions, triggering new sales.

Saying that it is not possible to clearly read the risk in the market, Manukyan concluded his article as follows: “Obviously there are buying advice, why not buy Ethereum, which was under $ 2000, now $ 1000? It shouldn’t be taken as we see that the structure we thought existed when it was $ 2000 is actually not solid. These levels could be the minimum for cryptocurrencies, but it is not yet possible to say that the liquidation is over. “

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