In other words, given the increase in retail and institutional investors, what happens in traditional markets is now likely to affect cryptocurrency markets as well. Retail investors are non-professional investors who use their money to trade, while institutional investors are often large companies that use other people’s money for trades. Retail investors have easier access to cryptocurrency through apps including Robinhood and Square and they’re most likely to sell off share at signs of uncertainty, Casares said.
Cryptocurrency drop: Bitcoin, Ethereum among cryptocurrencies losing value amid investor uncertainty Nick Casares, head of product at PolyientX, a platform for NFT projects, said the landscape of crypto was originally decoupled from the traditional economy, but that has changed dramatically.
“This time around, we’ve seen a lot more retail investment,” Casares explains, “We also have institutional money in crypto now that has come in a big way. And when that happens, it tends to create a coupling between traditional markets and the crypto market.” Why has the value of cryptocurrency dropped so much?
Stocks fell and Treasury yields climbed with Fed Chair Jerome Powell’s Wednesday announcement that signaled a plan to begin raising interest rates “soon” as the central bank moves to fight inflation. Steve Ehrlich, CEO of Voyager, a crypto trading company, suggests that the crypto collapse may have stemmed from the tech sector. “Everybody in the markets was nervous and speculating about what might happen there. So interest rate conversations coupled with a rising inflation rate, I think it’s affecting all asset classes,” Casares says.
The Fed met on Wednesday to determine whether or not a rate increase would happen to tackle rising inflation and labor shortages. And it has indeed been an uncertain week.
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