Morgan Stanley declared in a research report on May 12. Bitcoin (BTC) has dropped by 40 percent since April, and it has nothing to do with equity markets.
Sheen Sha wrote “Hyped and leveraged areas of crypto, such as decentralized finance and crypto-backed stablecoins are encountering mass liquidations, soon it is becoming apparent that all the lofty prices
were traded on the presumption of limited real user demand,” Non-fungible tokens (NFTs) and digital land have been subject too much speculation and inflows, according to the report adding that the explanation most people bought these investments was regarding the expectation that another buyer may attend to buy them for an elevated price in dollars.
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NFTs are a digital investment on a blockchain that shows owning virtual or concrete things that can be sold or traded. The bank noted that when crypto markets have been trading in November there have been a shocking collapse of the third largest stable coin terraUSD (UST)lately crypto-backed stablecoins became a significant part of the leverage made by the decentralized finance (DeFI)
ecosystem, in addition, this single event which has caused increased uncertainty and instability has made in a
“broader re-evaluation of where many crypto prices should be
trading at.”
The most speculative and leveraged areas of crypto markets are currently concentrated as interest rates rise around the world and the Federal Reserve deletes liquidity. The great increase in stable coin market capitalization – a 30 times rise since early 2020 – has affected pricing crypto, as stablecoins were in charge of preparing much liquidity and leverage.
Morgan Stanley mentioned that its customer is requesting if the great decrease in crypto rates and the decreasing of stable coins creates a “more systematic risk for broader financial markets.”
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