Kiwi investors are going through a crypto crash, but is that a good thing?

Last week, the cryptocurrency market lost $320 billion in value in one day.

A loss of confidence in two stablecoins, a type of cryptocurrency linked to real-world assets such as cash or bonds, which are supposed to be protected from volatility, caused the cryptocurrency market to fall by about 30%.

But crypto exchanges in New Zealand say they have seen an increase in local investors buying in the volatile market.

Financial experts are wondering if a 30% collapse in value won’t change the behavior of cryptocurrency investors, right?

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What happened?

Cryptocurrencies, such as bitcoin or ethereum, are lines of code designed to function as digital currencies.

A stablecoin is a type of cryptocurrency where the value is pegged to another currency or financial instrument, with the aim of avoiding the volatility of a larger crypto market.

But last week, the value of two major stablecoins collapsed. Terra, a stablecoin believed to match the value of the US dollar, traded at 0.13 US cents (0.2c NZ) last week. Another stablecoin, luna, crashed and traded for only a fraction of a cent.

Stablecoins are a type of cryptocurrency designed to avoid volatility.  But last week, the crash of two stablecoins shook investor confidence across the entire cryptocurrency market.

FATHER

Stablecoins are a type of cryptocurrency designed to avoid volatility. But last week, the crash of two stablecoins shook investor confidence across the entire cryptocurrency market.

After the value of two supposedly stable cryptocurrencies fell so drastically, panic in the broader crypto market caused widespread pullbacks.

By the end of the week, the entire crypto market had lost $400 billion (NZ$634 billion) in value.

How are New Zealand investors reacting?

Easy Crypto Managing Director Janine Grainger said investors in New Zealand responded by buying more crypto.

May is already the month with the highest trading volume for Easy Crypto this year.

Between 90 and 95% of transactions are people’s purchases, but the value remains even between buying and selling, meaning some investors sell in large quantities, while most buy in smaller quantities, Grainger said.

But Grainger was concerned when she saw investors buying Tether and Luna as their values ​​plummeted.

Easy Crypto Director Janine Grainger says she became concerned when investors started buying tether and luna stablecoins as their value plummeted.

As long as

Easy Crypto Director Janine Grainger says she became concerned when investors started buying tether and luna stablecoins as their value plummeted.

To stop this behavior, she made the decision to remove the chain and luna parts from the rig.

“While we don’t know people’s motivations for investing in crypto, if something drops significantly and people buy, they’re expected to ‘buy the dip’.

“Right now we need to make sure we don’t sell our customers something we can’t deliver.”

Experts say investor behavior is troubling

Simplicity CEO Sam Stubbs says relying on a crypto exchange for self-regulation is like asking the fox to take care of the chicken coop.

“If the exchanges are concerned, you have a serious problem, because their motivation was to get people to exchange as many of these things as possible,” he says.

Stubbs says he is not surprised that New Zealand investors continue to invest in the digital asset as its value falls, as it reinforces his belief that investing in cryptocurrency is a game.

Sam Stubbs, director of the Kiwisaver Simplicity fund, says relying on a crypto exchange for self-regulation is like asking the fox to take care of the chicken coop.

Chris McKeen / Things

Sam Stubbs, director of the Kiwisaver Simplicity fund, says relying on a crypto exchange for self-regulation is like asking the fox to take care of the chicken coop.

“When a player loses, he often doubles. This is exactly the behavior we see here.

Financial advisor and cryptocurrency expert Darcy Ungaro also says the behavior is troubling.

It’s worrying to see a “buy the dip” philosophy being applied to cryptocurrencies, as most coins can become completely worthless in the blink of an eye, he says.

Financial advisor Darcy Ungaro says the long-term crash is a positive one as it wakes up investors who are investing for the wrong reasons.

As long as

Financial advisor Darcy Ungaro says the long-term crash is a positive one as it wakes up investors who are investing for the wrong reasons.

“Many crypto assets outside of bitcoin will succeed or fail. In between they usually do nothing. This is why you will never want to buy the drop with most of these coins. If the price falls, it’s probably on track to fail,” Ungaro says.

The crash is positive for the cryptocurrency industry as a whole, he says.

“It will wake up a lot of people who are here for the wrong reasons. We will see less money being allocated to ‘meme stocks’ and capital will flow to the top performers, which will strengthen the market.

“It’s just a shame that some people who were sucked in for quick money were nailed.”

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