Cryptocurrencies have gained tremendous traction over the last few years. Institutional and celebrity support, along with persistent attention-grabbing headlines, have all contributed to this widespread adoption.
However, very recently the crypto market has been experiencing drastically dipping prices. What is this cryptocurrency crash?
A cryptocurrency crash can be considered as a decline of 10 percent or more in the price of the cryptocurrency over the course of a day. This typically occurs as a result of some breaking news or development that has completely altered market sentiment.
The situation thus far
Since the price of cryptocurrencies reached an all-time high at the end of the previous year, they have been falling. In the month of November last year, the most well-known cryptocurrency, Bitcoin, dropped more than two-thirds of its value relative to its all-time high. Top-performing cryptocurrencies on the cryptocurrency market are experiencing a similar price fall. But why is this taking place? This article will talk about the recent crash and the factors that are possibly causing the 2022 cryptocurrency crash.
All of the big cryptocurrencies that were once traded at inflated values are currently trading in the red. According to the most recent report, the cryptocurrency market fell by over 11 percent during the past week. This has an impact on almost all cryptocurrencies. For instance, in November 2022, the enjin coin price is expected to drop by about -1.04 percent.
Luna Terra money
The Luna Terra debacle served as the catalyst for the dramatic cryptocurrency market meltdown. This was a very unfortunate situation that severely harmed not just the investors but also the entire organization and ecology. According to sources, several investors who were interested in Terra Coin lost everything. Before the crash, this coin had a market capitalization of over 18 billion and was known for its stability. Stablecoins should cost the same as US dollars for any other Fiat organization.
As Luna lost 99.9 percent of its total value, the Terra team came up with a strategy to sell all of its Bitcoin holdings in order to restore the peg to $1. This strategy failed quickly and did not exactly turn out as intended. This had a knock-on impact that destroyed almost $40 billion from the market for cryptocurrencies.
The stock markets
The equity market and the cryptocurrency market are closely related. A downward trend in the stock market will always express itself in the cryptocurrency market as well. It is clear that a variety of factors have an identical impact on cryptocurrency values and the stock market.
According to the data gathered, the trend in cryptocurrencies went from high to very low between the end of 2021 and the middle of 2022. According to a different analysis, the movement of cryptocurrency prices is highly associated with that of IT stocks. Cryptocurrency markets are meant to function optimally without relying on conventional markets, yet they are extremely susceptible to changes in the mainstream financial sector.
A rise in interest rates
The US Federal Reserve has chosen to increase interest rates. It’s general knowledge that an impending recession will be signaled by an aggressive increase in interest rates. The stop market and the group to market both had a day of sharp declines, which caused many investors to lose faith and start selling all of their digital assets, leading to a bloodbath in the cryptocurrency market.
Celsius network
Due to the harsh market conditions at the moment, the decentralized finance platform Celsius network announced on Sunday that it is blocking all cryptocurrency transactions. Following this shutdown, there was a significant sell-off of all cryptocurrencies.
Regulatory obstacles
2022 isn’t exactly the finest year for cryptocurrencies. This year has been a nightmare for cryptocurrencies as the market dropped in January and rose once more in February. As they attempt to regulate cryptocurrencies, governments around the world have been watching the cryptocurrency industry closely.
Beginning in 2022, the Russian Central Bank suggested outlawing both the usage of cryptocurrencies and their mining within Russian borders. With all these regulatory obstacles, it was getting more and harder for investors to determine whether or not buying cryptocurrency was the proper move.
The Customer Price Index’s increase (CPI)
Another potential reason for the crypto catastrophe is the rise in the Customer Price Index (CPI), which is the highest inflation rate since 1981. Not just the Bitcoin industry has been negatively impacted, but also the global financial markets.
Is it still safe to make crypto investments?
One of the most troubling inquiries in modern years is this one. A bull run will shortly start, and the current negative period will soon come to a conclusion. Any investment decision must be carefully considered and examined. Investments have risks, and those willing to take them typically do so with the expectation of earning profitable returns.