The fall of Terra is not the only factor that could be generating volatility in the Bitcoin market space, as there are other causes to consider. Goldman and BoFA brought a detailed analysis on the subject.
The second-largest bank based in the United States of America, Bank of America (BoFA), has issued some hopeful analyses of the general bearish scenario in the cryptocurrency market.
In a recent report, the bank’s analysts highlighted that investors’ excessive concerns about the possibility of the digital asset market facing a “contagion” risk from Terra following its dramatic collapse last week are unfounded.
While the experts discussed that the decadence of Terra’s stable coin UST and its native cryptocurrency LUNA possibly helped boost the volatility in Bitcoin and the rest of the market, they think other factors are having a strong influence over the phenomenon.
In a May 17 note revealed by CoinDesk, the bank’s analysts highlighted that investors should already know that digital assets are an emerging technology asset class and tokens that manage the ecosystem as a dangerous place.
Digital assets face similar headwinds as traditional assets, including fluctuations in inflation, higher interest rates, and heightened recession risk.
BoFA Gives Hopes
The bank stated that the decoupling of UST is also not necessarily conducive to concluding the more extended stable coin market downturn. UST does not receive support from traditional assets, and the loss of its peg shows the durability of the broader tough coin market because the most significant stable coins kept theirs, CoinDesk wrote, citing the note.
The report also included factors that could have led to Terra’s recent implosion. According to the expert, the fall happened due to Terra prioritizing UST adoption over its price balance.
According to CoinDesk coverage, BoFA didn’t show a positive stance about Terra’s revival plans, still trusting in the potential for a successful algorithmic stablecoin. A governance vote got released to fork the Terra blockchain and thus generate a new and more improved version of the network.
The banking entity also explained that the event would boost regulations around stable coins, although it does not believe that this could lead to an outright ban. According to the coverage, the analysts said that banning algorithmic stablecoins would be a premature decision and could slow the evolution of the ecosystem.
Goldman Sachs Shows Optimism
The legendary Wall Street bank, Goldman Sachs, shared some views. In a report on Thursday, reviewed by CoinDesk, Goldman said it was unlikely that the Terra crash could impact the US economy. BofA analysts had already said that they did not consider that the event could indirectly impact traditional financial markets.
Both financial entities also appear to coincide with their bullish stance on the future of algorithmic stable coins. In a previous study, highlighted by The Block, Goldman analysts discussed that such currencies require further adoption in real-world payments to achieve success.
By: Jenson Nuñez
