The volatility in the cryptocurrency markets stayed high in the past week due to high inflation and fluctuations in the US Dollar. However, following the UK government’s U-turn on the tax cuts, the major digital tokens have been trading in the green.
“The volatility has broadly increased in recent weeks as the market participants reacted to the rising inflation and fluctuations in the US dollar,” Edul Patel, co-founder and CEO of crypto investment platform Mudrex, said.
“There was a major policy u-turn from the newly formed UK government, which decided to roll back the proposed tax cuts, that had sent the GBP into a depreciation spiral,” Parth Chaturvedi, lead of Crypto Ecosystem at trading platform CoinSwitch, said.
“Risk-on assets reacted in tandem, with most of them reversing their price slide, and have been trading in the green for the last two sessions,” he continued.
Bitcoin has risen 2.2 per cent in the last seven days, trading close to $20,000 on Friday, according to coinmarketcap. Ethereum was up 1 per cent in the last seven days and was trading at $1,355 on Friday.
“Since the Merge, ETH has slowed down a bit with several macroeconomic factors affecting the crypto market,” Patel said.
Ethereum completed its upgrade “Merge” on September 15. It shifted from the proof of work (PoW) mechanism to the proof of stake (PoS) mechanism. It is expected to cut energy consumption by 99.9 per cent.
However, the biggest news of the week came from Binance. According to reports, roughly $100 million of Binance Coin was stolen by hacking. Changpeng Zhao, the co-founder of Binance, announced it on Twitter.
“An exploit on a cross-chain bridge, BSC Token Hub, resulted in extra BNB. We have asked all validators to temporarily suspend BSC,” Zhao said.
Since the news, Binance has fallen nearly 4 per cent. It was trading at $283 on Friday. According to a report by Bloomberg, the incident involved $100 million to $110 million worth of digital tokens, and around $7 million of stolen funds have been frozen.
“The organization said that it will openly share all the details after the postmortem and introduce a new on-chain governance mechanism for better security in the future. A better and stronger network of validators is necessary as the world is moving to the web3 space,” Dileep Seinberg, founder & CEO of bill payment and crypto platform MuffinPay, said.
Despite the price recovery of major digital tokens, experts said that investors must stay cautious.
“The recovery seems to be built on fragile narratives and investors need to remain cautious, particularly regarding European inflation,” Chaturvedi said.
“If Ethereum can close the week by trading above the $1,400 level, we might see an upward trend in the coming week,” Patel added.
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