This week’s “sudden crash” that pulled Bitcoin (BTC-USD) below $50,000 — and sent other cryptocurrencies reeling in its wake — tarnished what should have been a momentous occasion for the first sovereign country on Earth to adopt crypto as legal tender. .
Despite the ugly price action, most true believers in cryptocurrency remain that way — even as some observers question bitcoin’s volatility, and El Salvador’s decision to throw its weight behind it.
Michael Sonnenchin, CEO of Grayscale Investments, the world’s largest crypto fund manager by assets, told Yahoo Finance Live this week that other countries are likely to join El Salvador in the race to legal tender for cryptocurrencies.
Matt Hogan, CIO at Bitwise, told Yahoo Finance Live, “This is the best time, I think, to get into the crypto market. A lot of the first decade of crypto was going from zero to one. … The question is now. It’s how fast we get from one to 100. A lot of that is based on the regulatory clarity we get.”
Undoubtedly, it has been a tough week for cryptocurrencies such as Bitcoin – which traded above $52,000 on Monday but hovered near $45,000 on Friday – as well as Ethereum (ETH-USD) and Cardano (ADA-USD). However, from peak to trough, the latter two did not lose nearly as much as bitcoin, which suffered from outflows of more than $3 billion during Tuesday’s sell-off, according to an investor.
On the other hand, the price of the cryptocurrency (SOL1-USD), which powers the Solana blockchain, is already above its pre-crash high, trading above $175 on Friday.
Anatomy of a Cryptocurrency Crash
In an interview with Yahoo Finance, Jeff Seikinger, a financial expert and founder of Miami-based crypto hedge fund Orca Capital, said he believes the overall cryptocurrency market will likely see significant growth through the end of this year, despite this week’s defeat. .
Like Coinbase’s IPO week, this week kicked off with another big market event – the new Bitcoin law in El Salvador, which was expected to be a boon to the industry.
Sekinger has seen its share of crypto market cycles. He first bought bitcoin in college in 2013, and the 2017 bull run convinced him to quit his job at JPMorgan Chase to focus on the asset class full time. He founded Orca Capital in April after two years.
Sekinger broke down trading volume, open interest levels, and on-chain analysis, and actually called this week’s sudden crash in a Youtube video he posted on August 31. It told Yahoo Finance it’s down to volume and three major uptrends.
“When perpetual funding, opening interest and price action all go up but volume slows, it was a telltale sign of the past three major crashes,” Sekinger told Yahoo Finance.
This time, he said, the pullback came from a combination of high leverage in the markets on top of crypto traders “buying rumors and selling news.” This was proof enough that the market is still relatively young — and still highly manipulated by a few big players, according to Sekinger.
Recognizing the difficulty of predicting market cycles, Sekinger said that the current bull market in cryptocurrency will likely end in the first or second quarter of next year.
“There will be a lot of euphoria and a lot of leverage and it will all collapse. Because we are starting to see serious money in the space, I think in terms of percentage correction, it will be lower,” Sekinger said.
Currently, Orca has two funds each with approximately 10 to 15 different assets that cumulatively hold $50 million under management today, with 167 limited partners. Since Orca’s inception, both funds have outperformed bitcoin while one has doubled the crypto’s return in the past year.
Within two months, Orca will launch two more funds – including a more robust Decentralized Finance (DeFi) fund. These additions should double the total value of assets under management, Sekinger said.
Retail investors “are seeing all these crazy stories about the ridiculous amount of money being made on NFTs and it gets their interest.”Jeff Seckinger, Cryptocurrency Portfolio Manager
In terms of leverage, Sekinger said his money can raise up to 5 percent in value, but they’ve never had the desire to get anywhere near 5 percent, and they usually use it at most “two to three times a year in small amounts.” “
Orca’s future offerings come from retail demand for investment tied to non-fungible token (NFT), according to Sekinger — something he linked to Solana’s explosive growth over the summer.
“One of the reasons for the explosion of SOL is that a large number of NFTs are moving from Ethereum to Solana because it is much cheaper to launch, buy and sell them on the Solana blockchain,” Sekinger said.
He said retail investors are “seeing all these crazy stories about the ridiculous amount of money being made on NFTs and that piques their interest.”
In light of the investment wellspring that NFTs have brought to the crypto market, investor interest in a higher-speed blockchain has quickly dominated the price action.
Since its update in London, the Ethereum blockchain is said to be executing 15 transactions per second, but reports of high fees due to network congestion have made traders reeling.
Based on tests, Cardano is said to perform 257 transactions per second and possibly many more with upgrades while Solana can complete 50,000 transactions per second.
David Hollerith covers Yahoo Finance’s cryptocurrency. follow him Tweet embed.
For more information about cryptocurrency, check out:
What is Dogecoin? How to buy it
Ethereum: what is it and how do you invest in it?
Top 21 Cryptocurrency Leaders to Watch in the Back Half of 2021
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