Crypto currency meltdown points to deeper financial crisis

It is described as the week in which the financial world changed – the CNBC business channel described it as a “new reality” – when it became clear that the world’s central banks intended to raise interest rates, whatever happened.

An ad for the Bitcoin cryptocurrency is displayed on a Hong Kong street on a street in Hong Kong on Thursday, February 17, 2022. [AP Photo/Kin Cheung]

The main action was the decision of the US Federal Reserve. UU. of increasing its base rate by 0.75 percentage points, the largest individual increase since 1994, with more to come.

The Bank of England raised its rate for the fifth time and predicted that the UK inflation rate would rise to 11 per cent. Smaller central banks, such as the Reserve Bank of Australia, have indicated that further rate hikes are being prepared.

One of the most significant decisions was made by the Swiss National Bank, which raised its base rate by 0.5 percentage points. He had previously been one of the strongest advocates of keeping rates at historic lows.

The official reason for the rise in rates is the need to fight inflation, but central banks are well aware that their actions will not reduce price increases. Its concerted action has another purpose. As inflation reaches its highest levels in four decades, it aims to suppress working-class wage demands around the world by causing a recession, if necessary.

Rising interest rates have caused a sharp drop in Wall Street-led stock markets around the world. The broad-based S&P 500 is down about 22 percent from its previous high and the Dow is approaching 20 percent. The technology-sensitive and interest-sensitive NASDAQ index fell more than 30 percent, and significant equities fell more than 50 percent from their highs.

One indication of the growing instability is the precipitous fall of cryptocurrencies and the decisions of traders to suspend operations due to turbulent market conditions.

Cryptocurrency lender Celsius Network, which sent a shock wave to the cryptocurrency market last week when it suspended withdrawals, said it would “take time” to normalize its operations. In a blog post yesterday, he said he would continue to work “with regulators and officials on this break and our company’s determination to find a solution.” But he gave no details.

The chaos began last month when the so-called stablecoin TerraUSD, used to facilitate cryptocurrency trading by providing a link to the US dollar, failed to maintain the dollar’s parity.

The closure of the retreats extended beyond Celsius. On Friday, Hong Kong-based cryptocurrency lender Babel Finance said it was halting withdrawals because of “unusual liquidity pressure” and that Singapore-based cryptocurrency hedge fund Three Arrows did not respond to calls. of margin of creditors.

Yesterday, Hong Kong-based cryptocurrency exchange Hoo halted transactions that threatened to deplete its funds. He said he was trying to reconfigure his assets in the medium and long term in an “orderly and reasonable manner”.

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