The crypto market has experienced massive sold-outs, plunging its total market valuation and clearing billions of dollars.
The sale was exacerbated by several macroeconomic factors, putting some cryptocurrencies at risk of bankruptcy and liquidation.
However, according to CNBC’s report, experts believe that the impact on the US economy will be minimal, despite the huge losses recorded in the crypto market.
What do experts say?
There is a lot of fear of cryptocurrency crashes causing a wider recession in the United States due to sudden sellouts and the resulting loss of money
According to the report, Goldman Sachs estimates reveal that US homes own one-third of the global crypto market. In addition, a Pew Research Center study claims that 16% of adults in the United States engaged in cryptocurrency transactions.
These findings add to the growing influence and adoption of cryptocurrencies in the country, leading to partnerships, sponsorships and invasion of pop culture.
However, experts say they are confident that the impact of the crash will be minimal to the US economy because it has nothing to do with debt. This consideration is even more important given that the crypto market is slightly smaller than the country’s $ 21 trillion GDP or $ 43 trillion housing market.
Joshua Gans, an economist at the University of Toronto, said:
“People don’t really use crypto as collateral for real-world debt. Without it, this is a lot of paper loss. Therefore, it’s at the bottom of the list of economic problems. “
Well-known venture capitalist Kevin O’Leary said that the decentralized nature of cryptocurrencies is the reason why it does not cause a recession. He said:
“Great news about the crypto economy, and even positions like Bitcoin and Ethereum, these are diversified holdings. It’s not just American investors exposed. Bitcoin has fallen by another 20%. If so, it’s not really a problem because it’s ubiquitous, and it’s only $ 880 billion before the fix, which isn’t a big hamburger. “
A recent research note from Morgan Stanley also detailed that most crypto transactions remain within the crypto ecosystem. For example, he said that crypto lenders mainly lend to crypto investors and businesses.
Therefore, the risks associated with cryptocurrency price tanking do not extend significantly to the broader Fiat US dollar banking system.
Some experts believe that a large sale is a necessary purge to lead to a more sustainable business model within the crypto ecosystem. Alkesh Shah, a global crypto and digital asset strategist at Bank of America, one such analyst, said:
“The collapse of weak business models such as TerraUSD and Luna can be healthy for the long-term health of this sector.”
However, Matty Greenspan, CEO of cryptocurrency research and investment firm Quantum Economics, attributed the sale to the Federal Reserve’s negligence. He states:
“The central bank printed a chunk of money very quickly when it wasn’t needed. This created undue risk and accumulated reckless leverage in the system. They withdrew liquidity. Now, the whole world is in a pinch. “
Continuous crypto winter
At its peak in November 2021, it had a market capitalization of over $ 2.9 trillion. However, after hitting a record high, the crypto market struggled to recreate the success of 2021 this year.
Cryptocurrencies such as Bitcoin and Ethereum have bombarded all profits in 2021. Bitcoin, for example, is trading below the 2017 peak of $ 19,220 at the time of the press.
Cryptocurrency institutions are suffering losses as well. Cryptographic companies such as Celsius, Coinbase, Three Arrows Capital, Crypto.com and Babel Finance have announced operational pain.
As expected, there were layoffs, business changes, and user activity restrictions by some companies to delay the effects of the recession. However, companies such as Binance have announced plans to expand their talent base and scope of operations.
