Are Small Cap Crypto Assets Rebounding A Sign Risk Appetite Returning?
June 23 2022 - 3:22AM
NEWSBTC
The crypto market just saw some slight recovery, but the
performances are upside down. Opposite to the way sellouts usually
play out, the Bitcoin dominance dropped dramatically as the asset
is underperforming the Small Cap index. From last November’s $3
trillion market cap, the crypto market is now down to around $800
billion: Smaller Altcoins Make A Strong Comeback Last week the
crypto market saw its bottom, followed now by some slight recovery.
As per Arcane Research’s latest weekly report, the smaller altcoins
have also been seeing red numbers with the Small Cap index shedding
27%, but it has been the best performer overall. In contrast,
Bitcoin had dropped 35%. Through this small window of relief during
June, we have seen the blue-chip coin underperform all other
indexes. As a result, BTC’s dominance in the market fell -1,51%
this week to 43,5% while Ether fell -0,31. The latter has been
declining since May from 19.5% to 15%. What’s Making This Crypto
Winter Colder The report notes that the primary driver of this
crypto crash has been the hedge fund Three Arrow Capital (3AC)
collapse. Having invested over $200 million in Luna Foundation
Guard’s token sale, 3AC’s liquidity ended up being wiped out and
its margin call was the last straw for the already pressured
market. Related Reading | How Long Will The CryptoWinter Last?
Cardano Founder Provides Answers As per the Wall Street Journal,
the crypto hedge fund hired legal and financial advisers to help
work out a solution for its investors and lenders. The firm is
looking for a way out, “including asset sales and a rescue by
another firm”. The prognostic is not very positive at the moment,
seeing the wave of liquidations and mitigations of losses by crypto
exchanges that have followed the collapse. “We were not the first
to get hit…This has been all part of the same contagion that has
affected many other firms,” Kyle Davies, 3AC’s co-founder, said in
an interview. Arcane Research explained that “In periods of
insolvency, creditors unwind the most liquid assets first, which is
likely the root cause of BTC and ETH’s relative underperformance in
the last week.” The report adds that “illiquid altcoins are more
challenging to sell at size, particularly during pressuring times,
which explains why smaller coins have experienced less excessive
selling pressure in the last week”. Meanwhile, Microstrategy CEO
Michael Saylor described the events around this winter as a “parade
of horribles” in which the consequences of lack of regulation in
the crypto field have made it possible for wash trading and
cross-collateralized altcoins to weigh down on Bitcoin. “What you
have is a $400 billion cloud of opaque, unregistered securities
trading without full and fair disclosure, and they are all
cross-collateralized with Bitcoin.” “The general public shouldn’t
be buying unregistered securities from wildcat bankers that may or
may not be there next Thursday,” Saylor added, slamming at the
recent collapses and suggesting that future actions by regulators
could prevent the level of volatility that BTC is now experiencing.
Related Reading | Crypto Investors Find Safety In Stablecoins,
Bitcoin, Ditch Altcoins En Masse
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