The sell-off in the cryptocurrency market continues. After the worst weekend in several years, when Bitcoin dropped 22%, causing investors to liquidate more than $ 1.5 billion worth of positions. The market is still in the red zone.
Many crypto enthusiasts who had been convinced that the current support of $50,000 was an unbreakable psychological barrier were wrong in their predictions. Bears who are apparently serious about pushing BTC to new lows have successfully tested the support level this week.
Experts share different opinions regarding the reasons for such a rapid BTC decline, followed by a dip in other stablecoins. Some believe that the downward trend was a reaction to new reports of a possible default of highly indebted developer China Evergrande Group (OTC:EGRNY), whose liabilities exceed $300 billion. Its representatives noted that there is no guarantee that the group will have sufficient funds to continue to perform its financial obligations, which once again sparked contagion concerns across China's property and banking sectors among market participants.
It is worth noting that Evergrande defaulting on its debt could negatively affect Tether - the stablecoin that plays a vital role in the cryptocurrency ecosystem. Tether is pegged to the US dollar and is often used by traders either as a store of value or to buy cryptocurrencies. Tether Holdings, which issued Tether, has already stated that it holds about half of its assets in commercial paper and certificates of deposit. Since the company didn't provide detailed information on its assets, many began to suspect that Tether could face higher risks associated with Chinese securities. In addition, the Evergrande defaulting is likely to trigger new defaults that could affect the commercial paper in Tether's portfolio.
Among other reasons for the BTC decline is the general market panic caused by the spread of Omicron, the new coronavirus variant, and the possibility of further stimulus reduction by the Federal Reserve. The Fed is expected to discuss an accelerated wind down of their bond-buying program at the next meeting, scheduled for Dec.15. If the Fed decides in favor of accelerating the timetable for tapering, the inevitable strengthening of the dollar coupled with rising Treasury yields can trigger another capital outflow from crypto exchanges. That being said, the BTC/USD decline may continue with a target at $30,000.