Francesco Carta Fotografo | Moment | Getty Images
The genocide in the crypto market will not give up because the token price has plummeted, The company dismisses the employee Some of the most popular names in the waves and in the industry Get angry.. The turmoil has surprised investors, erasing more than $ 2 trillion in value in a few months and wiping out the life savings of retailers who have made heavy bets on crypto projects billed as secure investments.
The sudden decline in wealth has aroused fear that cryptocurrency crashes may help cause a wider recession.
Market capitalization of less than $ 1 trillion in the crypto market (this is Apple) Is smaller than that of the country $ 21 trillion in GDP Or the $ 43 trillion housing market. However, Goldman Sachs estimates that US homes own one-third of the global crypto market. And Pew Research Center research We also found that 16% of adults in the United States said they invested, traded, or used cryptocurrencies. Therefore, there is some national exposure to deep sell-offs in the crypto market.
Then there is the whole mystery around the early crypto sector. Although it may be one of the smaller asset classes, popular culture has received a lot of attention from the vibrant industry with advertising in major sports championships and stadium sponsorships.
That said, economists and bankers have told CNBC that they are not worried about the knock-on effect of cryptocurrencies on the broader U.S. economy, one major reason that cryptocurrencies are not tied to debt. ..
“People don’t really use crypto as collateral for real-world debt. Without it, this is just a lot of paper loss. Therefore, it’s not on the list of economic problems. “The University of Toronto.
Gunns says that’s a big part of why the crypto market is still a “side show” of the economy.
The relationship between cryptocurrencies and debt is important.
In most traditional asset classes, their value is expected to be reasonably stable over a period of time. Therefore, these owned assets can be used as collateral for borrowing money.
“What you haven’t seen in crypto assets is the same process where you can buy other real-world assets or more traditional financial assets and borrow their foundations simply because of their volatility.” Guns explained.
“People used cryptocurrencies to borrow for other cryptocurrencies, but it’s part of a kind of crypto world.”
There are exceptions — MicroStrategy Takes $ 205 Million Bitcoin Assistance Loan Along with the crypto-focused bank Silvergate in March — but most of the time, crypto-backed loans reside within an industry-specific echo chamber.
According to a recent research note from Morgan Stanley, crypto lenders mainly lend to crypto investors and businesses. Therefore, the spillover risk of pushing cryptocurrency prices to the broader Fiat US dollar banking system “may be limited.”
For all enthusiasm Bitcoin And Kevin O’Leary, another cryptocurrency, venture capitalist and celebrity investor, points out that most digital asset holdings are not institutional.
Guns agrees, CNBC has a bank Everything that has been exposed to the crypto sold out.
“Sure, banks and other financial institutions are interested in crypto as an asset, and as an asset they want their clients to invest in, but in reality, that investment isn’t that much,” Guns said. He explained that banks have their own set of regulations and need to make sure things are a good investment.
“I don’t think we’ve seen the exposure we’ve seen in other financial crises,” he said.
Experts tell CNBC that the exposure of everyday moms and pop investors in the United States isn’t that high. Although some retailers have been hit by the recent spread of liquidation, the overall loss of the crypto market is small compared to the net worth of US households of $ 150 trillion.
Cryptocurrency holdings account for only 0.3% of US household value, compared to 33%, which is tied to stocks, according to a note from Goldman Sachs in May. The company expects the recent price decline to reduce total spending “very small.”
O’Leary who said that 20% of his portfolio is cryptocurrencyIt also points out that these losses are widespread all over the world.
“Great news about the crypto economy, and Bitcoin and Ethereum, These are diversified holdings. “Even if Bitcoin falls another 20%, it’s ubiquitous, so it shouldn’t really be a problem,” he said.
“And it’s only $ 880 billion before the fix, which isn’t a big burger,” O’Leary continued.
For comparison, BlackRock $ 10 trillion Assets under management are increasing, and after this year’s revision, the market value of the four most valuable tech companies remains above $ 5 trillion.
Some Wall Street analysts even believe that a failed crypto project fallout is good for the entire sector-a kind of stress test to flush out obvious business model flaws.
“The collapse of weak business models such as TerraUSD and Luna is probably healthy for the long-term health of this sector,” said Alkesh Shah, Global Cryptographic and Digital Asset Strategist at Bank of America.
The weaknesses of the crypto and digital asset sectors are part of a broader range of risk asset modifications, Shah said. Rather than pushing down the economy, crypto prices are tracking tech stocks lower. Both are succumbing to pressure from greater macroeconomic power, including endless spiral inflation and the Fed’s rate hikes.
“Higher than expected rate hikes, coupled with recession risk, have hit risk assets, including software and crypto / digital assets. As central banks are tightened globally, my strategic colleagues said: We expect central banks to deprive global markets of about $ 3 trillion in liquidity, “Shah continued.
Matty Greenspan, CEO of cryptocurrency research and investment firm Quantum Economics, has also blamed the Fed for tightening.
“The central bank printed funds very quickly when it wasn’t needed, which created undue risk to the system and recklessly accumulated leverage. Now that liquidity is being withdrawn, the world The whole thing feels a pinch. “