One cryptocurrency analyst has issued a warning about the possibility of a chain reaction as the cryptocurrency market continues its downward trend, shedding $70 billion from its market value in a single day and being driven by the drop of its most valuable digital asset, Bitcoin (BTC).
Indeed, the Director of Financial Markets at OKX, the world’s second-largest crypto exchange by spot trading volume, Lennix Lai, said that the crypto industry could be in for a “domino effect” much like the one the financial market went through in 2008, Evening Standard reported on August 19.
“The domino effect we’re seeing among crypto firms is akin to the 2008 financial crash among Wall Street firms,” he said.
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Similarities to the 2008 crash
According to the report, at least ten crypto firms have collapsed or suspended user withdrawals since the year’s turn, with declining Bitcoin price claiming victims across the landscape, including the Terra (LUNA) ecosystem, lending firm Celsius (CEL), and others.
Similarly, back in 2008, Wall Street companies started dropping one after the other after the housing market collapsed and borrowers could no longer afford to pay off their mortgages, overwhelming banks with loan losses on their balance sheets.
As Lai explained:
“Both cases resulted from institutions taking illogical risk, largely at the expense of investors.”
Crypto bears come out to play
Lai’s warnings arrive as $70 billion is wiped from the crypto market cap in a day, eroding the gains achieved in the previous weeks, and leading cryptocurrency trading expert Michaël van de Poppe to opine that the current market cap is facing rejection at a critical resistance level.
As for Bitcoin, the industry’s largest cryptocurrency, it has lost $30 billion from its market cap in 24 hours, failing to sustain the bullish momentum of the moderate two-month-old price uptrend that Finbold reported on August 15.
Meanwhile, Bitcoin was at press time trading at $21,452, representing a loss of 8.8% on the day, and 9.59% across the previous seven days, according to CoinMarketCap data retrieved on August 19.
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