You may have wondered why some altcoins seem to be more sensitive than others to the macroeconomic conditions. Bitcoin?
Matt Mena, an asset manager based in Switzerland, 21Shares’ crypto-research strategist, says that traders could look up to George Soros. This American investor who is also a famous philanthropist broke the British pound way back in 1992.
Mena said that Soros developed his theory of reflexivity during the 1950s. The trading concept is rooted in traditional finance. Decrypt This theory can be extended to include crypto. Soros’ reflexivity theory is based on the feedback loops between investors whereby price changes influence their behaviour, and this in turn influences prices.
The digital assets that have relatively lower market cap than Bitcoin are those like Ethereum You can also find out more about the following: Solana Mena noted that these instruments are more speculative, which makes them susceptible to a reflexive cycle. Fed rate cuts are expected to be more frequent. driven markets In fact, over the past few weeks, even cryptocurrencies outside of Bitcoin have experienced more volatility.
“When macro data signals improving liquidity, such as the potential for Fed rate cuts, it often leads to increased risk-taking,” “He said” “This inflow of capital into altcoins, driven by the expectation of higher returns, tends to magnify price movements.”
The following is a snapshot of the inflation rate as reported on Wednesday. Assuaged Bitcoin’s price has risen 3.8% to $96,800 from $96,800. $100,500 Over the past 12 hours, Ethereum and Solana have risen 7.1%. Ethereum and Solana both jumped by 7.1%. $3,450 10,7% of the population is able to $206, respectively.
By TradFi standards, Bitcoin is volatile. It is also more stable than the crypto equivalents. institutional adoptionMena added that the reputation of Mena as a trustworthy company makes it more resistant to reflexive trends. “digital gold” It acts as a kind of buffer.
While Soros’ theory of reflexivity can help explain altcoins’ outsized swings, Tony Acuña-Rohter, the CEO of EDX Markets, an institution-only crypto exchange, told Decrypt that there are other factors that can cause chain reactions in the crypto market—such as liquidations.
When an exchange forces a trader to close their position due to lack of funds, they are called liquidations. Trading leverage allows for traders to take a bigger position and increase potential gains or losses by borrowing funds from the exchange.
Bitcoins’ price dropped to $92,000 late in December from its previous record of $108,000, just three days earlier. liquidations spiked. According to, $1.4 Billion in liquidations were triggered by the Fed’s shift of outlook regarding rate cuts. CoinGlass.
What’s more, margin calls and stop orders can exacerbate price swings at the exchange level, Acuña-Rohter said, describing them as potentially potent risk management tools due to the overall structure of the crypto market, which is spread out across numerous exchanges.
“In crypto, [markets] are very fragmented,” “He said” “Exaggerated movements can become even more exaggerated, not just from the macro factors, but these micro-like risk management tools.”
Andrew Hayward edited the book