Crypto market crash poses many questions about digital currency


At BIS Innovation Hub, similar projects of CBDC interoperability are underway. At the ECB’s Forum of Central Banking, Skingsley remarked that the interoperability of CBDCs may not be easy to achieve. CBDCs are the result of the domestic monetary system of individual countries and they may not be primed to interact seamlessly with each other. Some countries may not play nicely given their concerns and reservations. So, interoperability of CBDCs may be a complex and layered experience.

Looking at the RBI’s reservations against stablecoins and cryptocurrencies, it doesn’t seem that Indian CBDC will be allowed to interact with them. It will affect its interoperability with other CBDCs that may be interacting with these assets.

Yifan says that blockchain came into prominence with Bitcoin but its scope and definition have expanded since.

So, there are multiple dimensions to blockchain technology and one of them is cryptocurrencies that came to be considered a store of value that’s immune to inflation and whimsical tax and monetary policies of governments. But the great crypto story is witnessing a sharp correction right now.

A cyclic market downturn is believed to be good as it removes overvaluation and hype for the market. In the wake of the latest market crash, several high-profile coins and companies have fallen flat. The collapse of the Terra Luna ecosystem, the fourth largest cryptocurrency before its crash, underlines the risk of algorithmic stablecoins compared to those backed by fiat.

Similarly, crypto lending platform Celsius Network’s downfall hints at overexposure to a particular asset, Terra Luna in this case.

The calm after a massive sell-off in the last few months has made many exchanges go insolvent.

The entire phenomenon can be understood with the example of two top-tier crypto exchanges – Coinbase and FTX. In its hurry to grow quickly, Coinbase increased its workforce to over 5000 while FTX managed its affairs with only 300 staff.

Now, when most crypto firms are reducing headcount and going bankrupt, FTX is planning to increase the number of employees to 400. It’s also spotting stressed assets for buyouts.

This explains the current turmoil in the cryptocurrency market.

(IPA Service)

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