Bitcoin and Ethereum: what is happening with cryptocurrencies | Sharp drop in prices, rise in US interest rates and China’s digital currency strategy

The cryptocurrencies started 2022 with a strong price adjustment. Bitcoin lost more than 12 percent in the first week of the year and Ethereum registered a 16 drop. Since the peaks recorded last year, the accumulated loss is 35 percent.

The upcoming changes in the international financial cycle seem to be one of the main problems for cryptoassets. The Federal Reserve (the central bank of the United States) began to tighten its position on interest rates and more and more analysts indicate that the superliquidity of dollars will begin to reverse this year.

The Fed’s concern about the acceleration of US inflation forces a change in the policy of monetary expansion and It is estimated that a first increase in interest rates would occur in March. Throughout 2022 there would be three raises in total.

The Cryptocurrencies, as with other traditional assets on the stock market, have benefited in recent years from abundant and cheap money globally. Low interest rates led to the financing of many technological innovation projects with digital currencies, which were not profitable at the moment and may not be profitable.

The change in the financial cycle of superliquidity alters this pattern and the Investors seem to have started to get ahead by modifying their asset portfolio. Last week there were days with heavy losses in Wall Street companies. And the adjustment in the price of cryptocurrencies, according to some analysts, is another consequence.

The uncertainty with crypto assets that worries the West goes unnoticed in China, which was ahead of the problem. Last year’s decision to declare activities related to private cryptocurrencies illegal, from mining to buying and selling, made it possible to disarm a source of tensions for speculative and environmental reasons.

The Asian power is focused on massifying its own technological development which is called the digital yuan. This digital currency began to be planned in 2014 and 2022 will be the year in which it becomes popular at the national level. It already has more than 150 million users.

In an article of the South China Morning Post It was anticipated that at the beginning of this year a official application of the digital yuan called e-CYN which is available for some Chinese regions and can be downloaded from Android and iOS (iphone). Until now, digital currency was used through banking applications. The application was developed and launched as an initiative of the Digital Currency Research Institute of the People’s Bank of China

Among the news, it was also announced that the digital yuan began to be included as one of the payment options on the Wechat Pay and platforms. The latter company is one of the leading e-commerce platforms in China.

The The objective is that the digital currency begins to have massiveness and frequent use. For this, two important dates in China are considered key. The first is the beginning of Lunar new year The first of february. During this holiday period it is common to send money as a gift between family and friends through virtual wallets.

The other important event begins on February 4 and is the Winter Olympics. Visitors from abroad arriving for the Games will be able to use the digital yuan at sports venues without the need for a bank account in China.

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Bitcoin and Ethereum: what is happening with cryptocurrencies | Sharp drop in prices, rise in US interest rates and China’s digital currency strategy

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