Other asset classes have managed to keep the lid on the day after the Fed hike, but tough times keep calling for Bitcoin and cryptocurrencies. Image Credit: Gulf News Archive

Dubai: Stock markets and currencies are holding the line the day after the Fed’s hike – but for Bitcoin and other cryptocurrencies, it’s still an indifferent day.

Bitcoin is at $21,773, up a marginal 0.40 per cent, while Ethereum has slipped 4.32 per cent to $1,173. Litecoin is at $47.99, down 1.34 per cent. Investors are left with some stark reminders:

  • Bitcoin down 22 per cent in 5 days;
  • Down 26.5 per cent over the last month;
  • Down 54 per cent 6 months;
  • Down 55 per cent year-to-date; and
  • Down 43 per cent over the last 12 months.

“Bitcoin dropping below the critical support level of $ 25,000 saw major stop-outs and long position exits at a rapid scale,” said Bal Kishen Rathore, CEO at Dubai-based Century Financial. “The ongoing bloodbath is a classic case of volatility begetting more volatility. Investors, in a way, are trying to negotiate some exit price with fears of a further downfall below the bull cycle open.

The investor bailout had already started since Bitcoin broke below the $25,000-$26,000 support zone.

- Bal Kishen Rathore of Dubai-based Century Financial

Crypto woes run deeper

Interest rate hikes and talk of bear market territory seem almost mundane when taken against some of the issues crypto asset holders are dealing with. It has reached a point where some OTC exchanges have stopped squaring positions until the meltdown cools down, even a bit.

“The reality is that there was a rapid rush into DeFi (Decentralized Finance) platforms where they started to use leverage in lending,” said Fred Pye, Chairman and CEO of 3iQ Corp. “However this leverage works against you if you cannot match up assets or liquidity.” (DeFi platforms allow trading in financial instruments including crypto without intermediaries, brokerages or banks. Everything is transacted as tokens over blockchains.)

“Here, Bitcoin has been primarily used as the security for these lending platforms – when people want to redeem, Bitcoin starts to see selling pressure,” Pye, who has a Bitcoin fund listed at Nasdaq Dubai, added.

“Bulls in this market will typically wait to see stability versus trying to call the bottom. Most long-term managers will start to wait for the market to settle and we can expect a return to the bull market in the next year or so.”

More pain then

The sentiments around crypto do seem as if it’s all taking place in a parallel universe. Jeffrey Halley, Senior Market Analyst at the FX consultancy Oanda, reckons there won’t be much cheer ahead. “Rumours of a Singapore-based crypto-lender-DeFi-hedge fund trying to ‘work it out with clients’ failing sent Bitcoin and Ether plummeting yesterday, Halley, who has been no fan of the alt-currencies, wrote in a note. “The market is also awash with rumours that $20,000.00 (for Bitcoin) is margin-call Armageddon.

“I don’t know if that is true, but when someone says, ‘this time it’s different’, it never is…”