Why Is Cryptocurrency Crashing?- Will It Rise Again?
In June, cryptocurrency markets reached a new low in 2022. The global cryptocurrency market capitalization fell below $1 trillion to $977 billion. After peaking at $3 trillion in November last year, the valuation of the global cryptocurrency market has fallen by more than $2 trillion. Almost every top coin is now worth half its top, if not less. The immediate cause of the cryptocurrency crash appears to be a sell-off by investors in response to growing concerns about inflation, as well as a halt to withdrawals by cryptocurrency lender Celsius.
As the stock markets watch, investors also continue to avoid riskier assets. Bitcoin, the largest and most widely used cryptocurrency, fell below $22,000, while other altcoins, starting with Ethereum, suffered losses. Ethereum has a similar pattern. On Thursday, the second-largest cryptocurrency fell below $1,000. Shiba Inu and Dogecoin were among the currencies that suffered losses. The current direction of the crypto market is showing more negative ups and downs, so why did it suddenly drop?
Why Did The Cryptocurrency Crash Happen?
Experts say investors are increasingly afraid of risky assets, making them disinterested in putting extra money into the market. When investing in the market, use caution because digital currencies are unpredictable.
However, the decline is being driven by US inflation, which this year has reached its highest level in 40 years. The Federal Reserve, which recently hiked interest rates to keep inflation under control, is also putting pressure on the digital currency market. Above all, these issues have made investors very cautious and, dare we say it, threatened. What will be end result of the cryptocurrency crash?
They are turning more and more investments into cash, pushing the market into the abyss. Rising interest rates have led to the selling off of higher-risk assets, with cryptocurrencies accounting for a large proportion. I believe, it is both a favorable and a disadvantageous period. Reducing the price of crypto will allow investors to acquire digital assets at the rate of 2021, unlike those who recoup their investment for fear of losing money. Therefore, not everything will be lost if the market for digital currencies declines.
Furthermore, Experts believe that the next few weeks will be crucial for the progress of the cryptocurrency market and they also believe that this is due to the global climate. In the crypto world alone, things are not looking rosy.
Cryptocurrency Crash- Why Crypto Is Down?
The economy threatens to stagnate, inflation is skyrocketing, interest rates are rising and the cost of living is rising. Equity markets are also volatile, with the US S&P 500 now entering a bear market at 20% below its recent high.
As a result, even the wealthiest investors have less discretion over their money. And many ordinary investors, not the wealthy hedge fund managers or companies, but ordinary people like you or me have less money to invest in something. In this cryptocurrency crash time, many people consider investing in cryptocurrencies that are volatile and unpredictable as a great risk.
Because it is safe and unregulated by financial authorities, you lose money if you invest money in it and it loses value or you can’t access your bitcoin wallet. All the uncertainty and volatility make cryptocurrency one of the riskiest financial instruments. Furthermore, In the past month, two of the lesser-known but important coins went bankrupt, further denting investor confidence in the industry as a whole.
As a result, more and more people are choosing to sell their homes. The value of Bitcoin is related to its attractiveness, so the more people sell it, the lower its value. As a result, more people sell and the cycle continues, with value dropping.
A digital currency’s value is based on supply and demand much like anything else that people want. When demand increases faster than supply, prices rise. For example, in the event of a drought, the price of cereals and crops will rise if demand remains stable. Digital currencies follow the principles of supply and demand.
Up & Downfall Of The Cryptocurrency Crash
Cryptocurrencies bounce, weave, collide, float, sneak up on you and surprise you. These changes are primarily driven by beliefs about the underlying value of each currency, regardless of economic performance such as the stock market.
The value of digital currencies increases when demand exceeds supply. The procedure for introducing cryptocurrency is well established; Each cryptocurrency reveals plans to mint and burn it. Some, like bitcoin, have a limited amount; We know that there will never be more than 21 million bitcoins. Demand can increase as project news spreads and becomes more useful. As digital currencies become investments, demand rises, limiting supply.
Some 2016 news articles show the two faces of cryptocurrency in terms of public perception. In February, it was revealed that Japan was considering making Bitcoin legal tender. Bitcoin fell 83% from $ 19,423 to $ 3,217 in the bear market for cryptocurrencies from 2017 to 2018. But as of November 2021, the coin was worth $ 68,000.
Over the same period, the price of Ethereum dropped from $ 1,448 to $ 85, a drop of 95%. The coin was valued at $ 4,850 in November 2021. Between 2013 and 2015, Bitcoin fell 82% from $ 1,127 to $ 200 in the bear market.
Further, when institutional investors began buying and holding Bitcoin in early 2021, the price of Bitcoin skyrocketed as demand exceeded the rate of generation of new coins and the total possible supply of Bitcoin was limited. Fintech companies such as PayPal and Square are betting on cryptocurrencies in 2021 by allowing consumers to buy cryptocurrencies on their platforms. Despite owning billions of cryptocurrencies,
Tesla continues to hesitate to accept Bitcoin payments. Experts expect this type of purchase to become more and more popular. Wal-Mart is also looking for a blockchain specialist to oversee that approach.
Cryptocurrency Crash-How To Navigate?
In 2021, Bitcoin’s price began to cycle and reached a record high of $ 68,000 in November. The current record is set after previous highs above $60,000 in April and October and a summer drop below $30,000 in July.
A few months later, a US judge ruled that cryptocurrency itself could not be considered real money. Crypto’s repute fluctuates like its price. Luna crashed on May 13, 2022, sparking global concern. The nonprofit’s bitcoin assets have fallen from more than 80,000 to about 300, according to a statement from the Luna Foundation (LFG). As a result, some investors have become vulnerable to market fluctuations.
Global investors lost $45 billion in a few days. The sale of this single coin has caused global sellouts in the crypto market, and investors have withdrawn money from crypto assets and deposited them in safer assets such as gold.
The situation at UST-Luna, coupled with geopolitical issues (causing delays in the supply chain) resulting from Russia’s invasion of Ukraine and the enactment of government regulatory legislation on virtual digital assets, has led to a drop in cryptocurrencies.
Interest rate hikes in key crypto countries reduce liquidity. Both signals triggered sell-offs and investors are taking a wait-and-see approach as the initial indicators are negative, following the data showing US inflation hitting a 40-year high.
Furthermore, Binance, the largest cryptocurrency exchange in the world, essentially a cryptocurrency trading platform, has temporarily suspended all bitcoin withdrawals. It was claimed that this was due to a “blocked transaction.” Celsius, a bitcoin lender, followed likewise, claiming “extreme market conditions”
Following 25,000 layoffs in the IT industry since May, Coinbase has laid off 1,100 staff. In a blog post published on Tuesday, Coinbase CEO Brian Armstrong claimed that a “crypto winter” had resulted in the layoffs of 1,100 employees.
What Is The Lowest Price Bitcoin And Ethereum Can Go?
Last week, Bitcoin fell below $ 30,000 for the first time, falling sharply to $ 25,000 on Sunday and falling to $ 21,000 on Monday. On Wednesday, the largest digital currency fell below $ 20,000 and remained in the area on Friday. Ethereum followed suit, dropping 30 percent last week to its 18-month low of $ 1,000.
You may be wondering how much Bitcoin and Ethereum are declining and whether you should buy them because the two most popular cryptocurrencies on the market are still declining.
While it is difficult to say for sure, many digital currency experts believe that Bitcoin and Ethereum are approaching their lowest point based on technical charts and historical data. According to the lower estimate, Bitcoin could drop to $14,000 and Ethereum to $500.
And why did cryptocurrency crash? Because the Crypto Winter is here and a significant spike is unlikely in the next 12-18 months. Fears of a recession prompted investors to sell riskier assets, and the collapse of Luna and TerraUSD last month, as well as lender Celsius’ decision to halt withdrawals this week, undermined investor confidence in the market.
If the massive sell-off in the market continues, there will be more crashes in the cryptocurrency market. As a result, investor confidence in the cryptocurrency market could deteriorate further and prices could fall even more.
Is This The End Of Cryptocurrency?
These days, users of cryptocurrencies may ask this question more than any other. In the past two weeks, the global cryptocurrency market has collapsed, with the value of some major cryptocurrencies hitting their lowest levels in 2022. During the current crisis, the price of one of the most popular cryptocurrencies (Luna) has dropped to almost zero.
Despite the massive decline, this is probably not the worst situation the entire crypto community has ever faced. As the world recovers from the global economic disaster, cryptocurrencies can expect a rebound.
Further, the Investors and the traders are also speculating whether the cryptocurrency market will recover this year. Cryptocurrency experts have different opinions on this cryptocurrency crash topic. Some analysts expect the bitcoin market will revive in the next months, but others don’t.
My guess is that cryptocurrencies will rise further and all this cryptocurrency crash will come to an end. The bloodshed and cryptocurrency winter must end by August 2022. Bitcoin could hit an all-time high of $70,000 in late December or early January 2023.
The relationship between cryptocurrencies and financial markets is getting stronger. The interaction of cryptocurrencies with the world’s financial markets exposes them to unfavorable signals from around the world. With inflation expected to continue for another two years, analysts believe that the upcoming economic downturn will make the crypto markets more vulnerable.
With the money supply in the United States growing at an annual rate of 18%, three times faster than GDP, inflation will persist for a number of years and will not be temporary. Further, Do Kwon’s strategy shows the will to return. However, it is difficult to reach the same level of value. There seems to be a pattern of paying off one debt by taking out another loan, which is not a stable pattern.
Will Crypto Return Back And Put An End To This Cryptocurrency Crash?
On the other hand, other major digital currencies are expected to improve by creating a stronger long-term future for crypto, just as Ethereum is in the next growth phase. This winter of digital currency may not end so soon, but it will return.
Further, Rising adoption rates could help push Bitcoin’s price higher in the future. As of June 2022, 7,879 merchants accept BTC as a form of payment and counting.
After Tesla CEO Elon Musk tweeted on April 2, 2021, that his electric cars could be bought with the digital currency, the coin’s value surged 12.52 percent, raising its price from $52,774.26 on March 24 2021 to $59,384.31. Tesla stopped buying Bitcoin cars over concerns about the environmental impact of the mining process.
Many observers pointed out that gold and bitcoin share some similarities, which could be another reason why the price of cryptocurrency is rising. The similarities between bitcoin and gold are hard to ignore. Both of these are regarded as natural hedges against inflation, true or false. Both have a limited supply. They have a minimal association with equity and fixed income securities. And they act as stores of money outside traditional systems like governments or central banks.
Is It Worth Buying A Dip?
There is no “perfect” time to start investing because market timing is impossible. Experts evaluate risk tolerance (cryptocurrencies are highly speculative) and the market when prices are low after addressing other financial goals such as emergency savings and traditional pension fund investments.
I think this is a good time to enter. Potential investors who want to buy this week should realize that market movement are normal. Be ready to lose much more money if you invest now when the price is still very low. Therefore, you should only bet as much as you want to lose. According to experts, cryptocurrency investments should account for less than 5% of your total portfolio.
If you want to buy dips, you may be wondering which cryptocurrency to invest in. While the future developments of Ethereum and Bitcoin are very speculative, they are still among the best cryptocurrencies to invest in right now, according to the experts we have talked about over the past year. Bitcoin and Ethereum are the most valued cryptocurrencies by market cap and trading volume.
Final Words On Why Is Cryptocurrency Crashing
Governments around the world are starting to support crypto legislation. The European Parliament passed additional monitoring regulations for crypto-asset providers this month, forcing them to collect information on asset owners.
Cryptocurrency owners are concerned about the impact of the new restrictions on their privacy. On Tuesday, China reiterated its ban on other digital currencies and banned financial institutions from offering crypto trading services. China is building its own state-run cryptocurrency.
In the United States, the new Securities and Exchange Commission (SEC) Chairman, Gary Gensler, said earlier this month that regulators need to be “tech-agnostic” but need greater consumer protections in the cryptocurrency market.
I strongly believe that government attacks on cryptocurrencies will lead to another “crypto winter” and a drop in business activity. Many developing countries view cryptocurrencies as a risk to fiat currencies and monetary systems and could face harsh retaliation.
In addition, more than 28,000 investors from 23 countries in North America, Latin America, Europe, Africa, the Middle East, and Asia-Pacific participated in the survey. According to 88% of institutional respondents and 75% of retail investors, cryptocurrencies will be widely adopted within 10 years.
According to the survey, 80% of institutional investors said cryptocurrencies will overtake traditional investment vehicles. Cryptocurrency as an asset class enjoys a high level of trust, with 71% of investment professionals reporting it and 65% of general investors trusting it.
According to the report, other investment instruments in the decentralized financial ecosystem (DeFi) have high levels of trust, becoming popular with individual and institutional investors with stablecoins, non-exchangeable tokens, and blockchain. In my opinion, cryptocurrencies will certainly become popular in the next 10 years.