As the cryptocurrency market rose slightly above $2.5 trillion, industry giants began to levy the decentralized industry’s growth as an inevitable phenomenon. However, a senior official from the Reserve Bank of Australia (RBA) argued otherwise, claiming that crypto’s eminent gains could be reversed by changing trends along with regulatory and monetary developments.
RBA’s head of payments policy, Tony Richards delivered a speech, regarding which of the three, Cryptocurrencies, Stablecoins, or Central Bank Digital Currencies are the future of payments, noting that there are manifold techniques to crush the crypto trend. These methods include a drop in the influence of fads, increased concern about the industry’s energy usage, as well as association with financial crimes, which can easily cause a reversal effect in crypto’s popularity.
“There are plausible scenarios where a range of factors could come together to significantly challenge the current fervor for cryptocurrencies…The current speculative demand could begin to reverse, and much of the price increases of recent years could be unwound.”, Richards said.
Is RBA against CBDCs?
While commenting on the destructible nature of crypto, Richards also pointed out that he does not entirely believe in CBDCs either, given that the issue is not of, whether an asset is regulated or unregulated, rather the question of if it is even required in an economy? However, he confirmed that as Central Banks across the world have begun testing CBDCs, RBA will also start research on the subject, despite its perspective that Australia does not need a CBDC.
“The bank acknowledges the argument being made internationally that with all the innovation that is occurring in the payments area, provision of a new digital form of central bank money for general purpose use could be important for safeguarding confidence in national monies and the role of fiat currencies.”, he added.
The majority of regulators globally are gravitating towards CBDCs since they offer centralized control, further enabling customer protection. Nevertheless, China already suffered its first case of fraud using Digital Yuan, henceforth, security cannot be guaranteed on decentralized blockchains or centralized e-wallets.
Crypto market crash: 3 key reasons which triggered the market crash
- The global crypto market is down over 17% since yesterday.
- Live exchange data indicate large-scale sell-off in the last 24 hours.
- The crash was triggered by panic-selling due to several recent events in the industry.
The global cryptocurrency market is down by over 17% in the last 24 hours. While a crypto market crash in December was anticipated by experts, the scale above 10% was significantly surprising for most investors. We entered the bear market in early November and the bulls occasionally pulled back earlier last week due to some major metaverse project announcements surrounding crypto.
However, increasing FUD surrounding the new Covid variant and stock market plunge has caused crypto prices across the market to crash below their predicted support zone.
A summary of what’s happening in the market today
Bitcoin prices have plunged below $50K for the first time in 2 months. Bitcoin was trading at around $43.5K earlier today, its lowest since September. BTC has since made a climb back up to the $47K zone.
The major surprise however was Etehreum. ETH is down by almost 15% in the last 24 hours. The altcoin was showing tremendous support above the $4K range during November’s bear market but went down to $3,497 earlier today, its lowest since September. ETH has since made a slow climb back up to $3.9K.
Litecoin suffered the biggest blow among the top 20 cryptocurrencies, as the altcoin is down over 25% in the last 24 hours. Metaverse coins Sandbox (SAND) and Decetraland (MANA) also suffered a blow above 20% in today’s crash.
Let’s see what’s actually causing today’s crypto market crash.
Exchange Reserve sharply increased
All exchanges reserve is a metric that shows the total amount of crypto being held in centralized crypto wallets. There has been a sharp increase in both BTC and ETH all exchange reserve flows. This means that more investors are depositing their crypto for fiat withdrawal, which suggests a high rate of liquidity and crypto sell-off.
Estimated Leverage Ratio Hit the All-time High
The estimated Leverage Ratio indicates the average amount of leverage used by crypto investors. As the leverage ratio for both Bitcoin and Ethereum hit an all-time high yesterday on the Binance exchange, it indicates that crypto traders currently hold a high-risk sentiment towards trading. Again, this is led to a large-scale sell-off since yesterday, causing the crypto market crash.
Exchange Whale Ratio hit the three-year high
Earlier last week, the BTC Exchange Whale ratio surged to 91%, a three-year high. The exchange Whale ratio indicates the approximate size of the top 10 deposits compared to the total deposit volume across all exchanges.
When the ratio reaches significantly over 85%, it indicates mass-dumping, suggesting that whales are liquidating their crypto assets. Also when the exchange whale ratio surges, it creates fear among relatively small investors.
The crypto market crash is largely triggered by panic selling
Overall, the key trigger behind today’s crypto market crash is panic selling. Earlier this week, billionaire American investor Charlie Munger lashed out at cryptocurrency, saying that he wishes crypto had never been invented.
Also, the $10 million hack of BadgerDAO and India’s crypto regulation plans contributed to the panic selling. There were also concerns about the new Covid-19 variant, which could negatively impact the global financial state that is still trying to recover from the pandemic.
Although the veteran and experienced investors are not phased by such events, new investors are easily giving in to the FUD, resulting in a large-scale crypto sell-off. However, not everyone is seeing the crypto market crash as a negative event. The CEO of Tron and El Salvador has already bought into the dip, adding more Bitcoins to their crypto wallets.
Some experts are also indicating that today’s crypto market crash resembles the bull market pattern of 2017, which later saw Bitcoin and other altcoins skyrocket. For now, it’s time to sit back and assess, as the crypto market seems to be dipping further going into the weekend.
Crypto Market Crashes Again in 2021, Did You Buy The Dip?
The crypto space witnessed yet another steep free-fall, which extracted 26% of the total market cap which revisited $1.9 trillion levels before recovery. Also, the DeFi and the NFT’s space shed huge gains in the recent sell-off. BTC alone faced long liquidations of nearly $1.9 billion in the past couple of hours, liquidating more than 300K traders. The bulls quickly jumped in to accumulate Bitcoin and other altcoins at huge discounted prices. However, despite the rebound, yet the uptrend needs to be confirmed.
Crypto Market Crash Continues
A popular on-chain analytics platform shared some interesting insights that occurred just before the plunge began. CryptoQuant lists 3 main indicators that pointed toward a massive movement happening ahead.
3 Key $BTC Data Changes Before The Plunge:
1/ Exchange Reserve sharply increased👇https://t.co/Z0yqJOwmKX
2/ Estimated Leverage Ratio Hit the All-time High👇https://t.co/hdyXEZWj2j
3/ Exchange Whale Ratio hit the three-year high👇https://t.co/Tmf5uIP5sL pic.twitter.com/KBy5MwLAR4— CryptoQuant.com (@cryptoquant_com) December 4, 2021
As per the on-chain platform, the exchange increased its reserves just before the plunge to have a sufficient balance to buy the dip. The estimated leverage ratio also hit ATH which signifies that the traders were ready with high-leverage short trades much before the dip. And interestingly, the whale ratio hitting 3-year high points out towards a pre-planned strategy. It appears that the whales and the exchanges were well-informed about the dip much before the plunge.
Nearly $1.3 billion in long positions were liquidated during this dump from $51K to $42K. The total open interest has gone down from $21.6 billion to $16.7 billion in just 30 minutes. And hence nearly $5 billion of the open interest just evaporated during the plunge. And interestingly, huge long positions were limited on Binance and Bybit indicating the preparations for the upcoming plunge.
Overall, the crypto space after hitting the bottom is on the path of a decent recovery. All the altcoins including Bitcoin are attempting hard to get back to their initial positions. December was expected to be pretty bullish for the space but the sudden crash has hindered the rally. However, the resumption of the bull run may be completely dependent on the recovery rate and pace. Once BTC’s price regains positions above $55K, then the possibilities of the higher target may come back to life.
Indian Crypto Bill in Anvil, Govt. to Weigh Pros & Cons of Crypto
The latest update in the controversial Indian Crypto Bill saw the Finance Minister, Nirmala Sitharaman consider the underlying technological boon that comes with the industry’s banes. While speaking at the ‘Agenda Aaj Tak‘ event in Delhi yesterday, Sitharaman noted that the crypto bill is in anvil and will soon be sent for approval to the cabinet.
Furthermore, she highlighted the juxtaposition given the government’s concerns about the decentralised industry accompanied by their plan to fully avail the financial benefits of the blockchain technology. Following this mindset, she ascertained that the “Cryptocurrency bill will take into account the underlying technology”.
Ambani’s Two-Cents on Crypto
The Indian government appears to be on the right track, financially, given that even the richest man in all of Asia, Mukesh Ambani swears by the same technological advancement with the blockchain.
He spoke yesterday, at a forum organised by India’s International Financial Services Centres Authority together with Bloomberg, where he argued the potential of blockchain technology. Ambani said, “Blockchain is the technology I believe in and it is different from crypto”. Ambani claimed that India will see an evolution in its “fintech, education technology, health technology, and industry” through digital services.
Furthermore, he compared the power of data to that of former days’ oil, asserting the only difference being, data’s easy accessibility.
“Digital technology, I believe, is a great leveler, a great democratizer…The new oil, i.e. data, can be generated and consumed everywhere and by everybody. It has the potential to create value equitably across sectors, geographies, and economic classes.”, said Ambani.
Despite understanding the pros, like innovation and technological advancements, the Indian government is determined to regulate the decentralised industry in lieu of its dangerously fast-evolving nature. According to CoinGape’s exclusive coverage on Nirmala Sitharaman’s stance towards upcoming crypto regulations, she noted that mere national level monitoring will never be enough when it comes to the decentralised industry. Sitharaman called upon global regulators to come together to centralise a borderless body like crypto.
“All of us also recognise technology respects no physical border. Technology has the power to sweep through borders. It means global action is the only way in which you can regulate it effectively”, said Sitharaman.