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Does the cryptocurrency crash pose a threat to the financial system?

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2 years ago

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Does the cryptocurrency crash pose a threat to the financial system?

By Hannah Lang

WASHINGTON (Reuters) – On Tuesday, bitcoin fell briefly beneath $30,000 for the primary time in 10 months, whereas cryptocurrencies general have misplaced practically $800 billion in market worth up to now month, in line with knowledge web site CoinMarketCap, as buyers fret about tightening financial coverage.

In contrast with the Fed’s final tightening cycle which started in 2016 crypto is a a lot greater market, elevating issues about its interconnectivity with the remainder of the monetary system.

HOW BIG IS THE CRYPTOCURRENCY MARKET?

In November, the preferred cryptocurrency, bitcoin, hit an all-time excessive of greater than $68,000, pushing the worth of the crypto market to $3 trillion, in line with CoinGecko. That determine was $1.51 trillion on Tuesday.

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Bitcoin accounts for practically $600 billion of that worth, adopted by ethereum, with a $285 billion market cap.

Though cryptocurrencies have loved explosive progress, the market remains to be comparatively small.

The U.S. fairness markets, for instance, are price $49 trillion whereas the Securities Business and Monetary Markets Affiliation has pegged the excellent worth of U.S. mounted earnings markets at $52.9 trillion as of the tip of 2021.

WHO OWNS AND TRADES CRYPTOCURRENCIES?

Cryptocurrency began out as a retail phenomenon, however institutional curiosity from exchanges, firms, banks, hedge funds and mutual funds is rising quick.

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Whereas knowledge on the proportion of retail versus institutional buyers within the crypto market is difficult to return by, Coinbase, the world’s largest cryptocurrency change, stated institutional and retail buyers every accounted for about 50% of the property on its platform within the fourth quarter.

Its institutional shoppers traded $1.14 trillion in crypto in 2021, up from simply $120 billion in 2020, Coinbase stated.

Many of the bitcoin and ethereum in circulation is held by a choose few. An October report from the Nationwide Bureau of Financial Analysis (NBER) discovered that 10,000 bitcoin buyers, each people and entities, management about one-third of the bitcoin market, and 1,000 buyers personal roughly 3 million bitcoin tokens.

Roughly 14% of Individuals have been invested in digital property as of 2021, in line with College of Chicago analysis.

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COULD A CRYPTO CRASH HURT THE FINANCIAL SYSTEM?

Whereas the general crypto market is comparatively small, the U.S. Federal Reserve, Treasury Division and the worldwide Monetary Stability Board have flagged stablecoins – digital tokens pegged to the worth of conventional property – as a possible risk to monetary stability.

Stablecoins are largely used to facilitate buying and selling in different digital property. They’re backed by property that may lose worth or develop into illiquid in occasions of market stress, whereas the principles and disclosures surrounding these property and buyers’ redemption rights are murky.

That would make stablecoins inclined to a lack of investor confidence, significantly in occasions of market stress, regulators have stated.

That occurred on Monday, when TerraUSD, a serious stablecoin, broke its 1:1 peg to the greenback and fell as little as $0.67, in line with CoinGecko. That transfer partly contributed to bitcoin’s fall.

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Though TerraUSD maintains its tie to the greenback by way of an algorithm, investor runs on stablecoins that preserve reserves in property like money or industrial paper might spill over into the normal monetary system, inflicting stress in these underlying asset lessons, say regulators.

With extra firms’ fortunes tied to the efficiency of crypto property and conventional monetary establishments dabbling extra within the asset class, different dangers are rising, say regulators. In March, for instance, the Performing Comptroller of the Foreign money warned that banks may very well be tripped up by crypto derivatives and unhedged crypto exposures, given they’re working with little historic value knowledge.

Nonetheless, regulators general are divided on the dimensions of the risk a crypto crash poses to the monetary system and broader financial system.

(Reporting by Hannah Lang in Washington; Modifying by Michelle Value and Matthew Lewis)

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Crypto

Crypto bull market fuels creation of 88K millionaires, six billionaires in 2024 – report

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7 hours ago

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September 1, 2024

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Crypto bull market fuels creation of 88K millionaires, six billionaires in 2024 – report

AlexSava

The 2024 cryptocurrency bull market has sparked a remarkable surge in wealth, creating over 88K new millionaires and elevating six individuals to billionaire status, according to a recent report by British investment migration consultancy Henley & Partners.

The number ofBTC-USDthe launchushered in

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Tesla CEO Elon Musk Wants To Bring Back Dogecoin As A Payment Option To Buy Company's Merchandise – Tesla (NASDAQ:TSLA)

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17 hours ago

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August 31, 2024

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Tesla CEO Elon Musk Wants To Bring Back Dogecoin As A Payment Option To Buy Company's Merchandise – Tesla (NASDAQ:TSLA)

Tesla Inc TSLA CEO Elon Musk said on Friday that he would like to have the option of paying with meme cryptocurrency Dogecoin DOGE/USD reinstated for the company’s merchandise.

What Happened: “Me,” Musk wrote in reply to an X user who asked whether anyone would like Tesla to reinstate the option of paying with Dogecoin for its merchandise.

Tesla has an online shop with company merchandise. Though it currently only allows payment in dollars, it previously allowed users to make payments with Dogecoin. Earlier this year, Musk even suggested in an address during his visit to Giga Berlin that the company would accept Dogecoin as an official form of payment for its cars at some point.

The EV giant’s website even has a support page for clearing doubts about paying with Dogecoin for its products.

“Tesla only accepts Dogecoin. Tesla cannot receive or detect any other digital assets. Ensure you are making your purchase with Dogecoin. Sending any other digital assets may result in the assets being lost or destroyed,” the page reads.

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Why It Matters: Earlier this week, Musk and Tesla secured the dismissal of a federal lawsuit accusing them of defrauding investors through insider trading and market manipulation of Dogecoin.

The decision was delivered on Thursday night by U.S. District Judge Alvin Hellerstein. Investors had accused Musk of exploiting Twitter (now X) posts and other publicity stunts to trade profitably at their expense through several Dogecoin wallets controlled by him or Tesla.

Judge Hellerstein, however, stated that no reasonable investor could rely on social media posts to pursue a securities fraud claim. The lawsuit was subsequently dismissed with prejudice, preventing it from being filed again. 

Over the years, Dogecoin’s price movement has become increasingly linked to social posts and endorsements by Musk, as well as developments around companies owned by him.

Earlier this month, Musk posted an AI-generated image referencing the cryptocurrency through his X account, which caused it to spike.

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Check out more of Benzinga’s Future Of Mobility coverage by following this link.

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© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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North Korean Hackers Exploit Chrome Flaw to Steal Cryptocurrency: Report

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1 day ago

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August 31, 2024

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North Korean Hackers Exploit Chrome Flaw to Steal Cryptocurrency: Report

According to a recent report by Microsoft’s cybersecurity team, a group of North Korean hackers known as the “Citrine Sleet” have exploited a previous flaw in Google Chrome to steal cryptocurrency from people.

Microsoft first became aware of the cyberattack on Aug 19, when the hackers exploited a vulnerability in the Chromium engine, the open-source software that powers Chrome and other popular browsers like Microsoft Edge. 

This type of flaw is called “Zero-day”, meaning that Google was unaware of the issue and had no time to fix it before it was exploited.

According to Microsoft researchers, Citrine Sleet which operates similarly to the popular notorious Lazarus Group, often creates fake websites that look like real crypto trading platforms to trick people They use these fake sites to get users to download harmful software known as “AppleJeus”. 

This software is often disguised as job applications or cryptocurrency wallets. Once the software is installed, it gives the hackers control over the victim’s device, allowing them to steal their cryptocurrency.

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Google eventually released a fix for this flaw on Aug, 21, two days after being alerted by Microsoft. However, it’s still unclear how many organizations or people were affected by the attack

Also Read: Kylian Mbappé’s X Account Hack Fuels $1 Million Crypto Scam

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