Crypto investors have been feeling the heat in the past week as their investments have gone downhill. The largest cryptocurrency, Bitcoin (BTC), has seen its price fluctuate between $27k-$29k, while Ether (ETH) dropped below $2k once again. But could the Coinbase effect be behind this bearish market?
The Bad News
This past Tuesday, Coinbase made some big news when CEO Brian Armstrong announced that the cryptocurrency exchange may be exiting the US markets due to growing regulatory pressure. This news was a huge blow for crypto investors in the US, who were already bewildered by the lack of clarity from the regulatory authorities.
But this isn’t the only bad news hitting the crypto markets. On Wednesday, the price of BTC fell below $30k after a huge sell order on Binance, and U.K.’s inflation data further sent the price tumbling. This news seemed to have caught traders off guard who were expecting an increase in BTC’s price.
DEX Is Rising in Popularity, But The Adoption Rate Remains Low
The Tie’s report shows that Decentralized Exchanges (DEX) are gaining more attention due to security and anonymity concerns with centralized trading. However, the usage of DEX is still not enough, as DeFi only accounts for 5% of the overall crypto market cap. (https://www.sweetfixbaker.com) This indicates that there is still a long way to go before DEX can become a mainstream trading platform. To increase the usage of DEX, more education and awareness need to be provided to the public, as well as more secure and user-friendly platforms.
Crypto Markets in Bearish Mode
The news of Coinbase’s US exit has further been overshadowed by the poor performance of big banks in Q1 earnings, and the US’s Manufacturing PMI which dropped to its lowest level in three years. Add to this the two-year Treasury yield which had increased to 4.26%, and increasing regulatory scrutiny against DeFi exchanges, and it’s not hard to see why the crypto markets are in a bearish mode.
So is Coinbase’s recent announcement the cause of this crypto crash? It’s hard to say. However, what is clear is that the lack of clear regulatory guidance and the poor Q1 performance of the banking sector has had a ripple effect on the crypto markets. Until there is some amount of clarity on these issues, it’s safe to assume that Bitcoin and Ether will remain in this bearish rut.
