As of Thursday morning, bitcoin prices had stabilized after their sharp decline earlier this week. "Digital Gold" is currently trading at around $ 31,200, up almost 0.5% in the last 24 hours. While Ethereum and Bitcoin have stabilized somewhat, analysts are wary of the big risks in the stable coin market.

Crypto Losses and Gains

Despite the slight increase, the bitcoin is trading much lower than a year ago, down about 45% year-on-year. Bitcoin prices are down about 34% today and are trading well at their all-time high of around ً 69,000 in November 2021.

Over the past 24 hours, Ethereum prices have fallen nearly 0.7% to $ 2,350, while Bitcoin cash prices have fallen about 4%.

Stable coin Risks in Focus

One of the main culprits behind this week's decline in cryptocurrency markets is the so-called "stable coins". Corrupt investors should watch for instability between stable coins, especially TerraUSD (UST) backed by Terra (LUNA).

In the last 24 hours, UST was down 44%, and LUNA was down an incredible 92%.

Yesterday, Treasury Secretary Janet Yellen told the Senate Banking Committee, "The price of a stable coin, known as Terra USD, has fallen. I think this makes it clear that it is a fast-growing product and There are risks to financial stability and we need a framework that is appropriate.

Crypto Is Now Strongly Correlated With Equities

Many cryptocurrency investors have argued that the bitcoin is a new version of gold for the digital age, a potential flight protection investment and a hedge against inflation. But the price action in cryptocurrencies shows that the market does not view these highly volatile assets as reliable stores of value in times of economic uncertainty.

Gold has historically had an inverse relationship with stock prices, a relationship that is expected to end in 2022. While stock prices have fallen, the price of gold has risen about 3% in 2022, while the S&P 500 is down about 16%. Years to date

The selling pressure in the stock market is mainly due to the persistent high US inflation and the fear of the Fed's aggressive measures to combat it. The Consumer Price Index (CPI) rose 8.3 percent in April from a year earlier, the highest since 1981.

Earlier this month, the Fed raised interest rates by 50 bps to a new target range of between 75% and 1%. In his press conference after the announcement, Fed Chair Jerome Powell said an additional 50 bps increase was on the table for the next two FOMC meetings.

The Fed will also begin approving 30 30 billion in US Treasury and 17 17.5 billion in mortgage-backed securities to roll off its balance sheet starting in June.

Brian Price, senior vice president of investment management and research at Commonwealth, says the path to minimal resistance to risky assets is still on the downside.

"The focus is on inflation, rising interest rates and the war in Ukraine," Price said. "The market is currently devoid of much positive stimulus, so it is not surprising that we are starting the weekend under pressure."

The sale of the stock confirms that investors are seeking refuge from the potential negative economic effects of the Fed's austerity measures, and are not just looking for it in the corrupt currency market.

What You Need To Know About Crypto Investing

Early investors in Bitcoin, Ethereum and other cryptocurrencies have killed. But the cryptocurrency market has a long history of extreme volatility, which investors are not looking for in market uncertainties.

In fact, Bitcoin has made many deep pullbacks of more than 80% in its entire history, including almost 80% crashes in 2018.

Like most other cryptocurrencies, Bitcoin is not linked to physical assets or intellectual property, and it does not generate cash flows or pay investors interest or interest. Instead, experts say, the price of Bitcoin is only linked to supply and demand, making it difficult to estimate its core value.

Berkshire Hathaway CEO and investment legend Warren Buffett recently discussed the pitfalls of Bitcoin at Berkshire's annual investor meeting, telling investors he would not pay $ 25 for "all the Bitcoin in the world".

"I don't know if it will go up or down in the next year or five years or 10 years. But one thing I am sure of is that it does not multiply, it does not produce anything." he said.

Bitcoins and other cryptocurrencies may eventually see their volatility and other risky assets disappear. Nevertheless, recent price action in the cryptocurrency market suggests that the difficult journey for crypto investors may continue in the near term.

Should You Buy the Dip in Crypto?

Corrupt investors should be cautious when it comes to buying dips.

With asset prices plummeting in the cryptocurrency market these days, it could make a coin look like a super deal. But old Wall Street professionals have a thumbs-up rule that aptly describes such moments: "Never try to catch a falling knife."

Using your imagination, you should understand that catching a falling knife; aka "buying a dip" - is almost always painful. This does not mean that skilled investors cannot trade instant money in the face of increasing market fluctuations. But the point here is that big, rapid movements in the market are not the right time for regular people to jump into the market.

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• Abdul Kareem