Speculative fervour, government action, and interest rates can all have an effect on the prices of cryptocurrency. As interest rates continue to rise, investors will turn to safer investments such as savings accounts for more predictable returns. As prices drop, investors will free up Crypto Crash to invest in safer assets. Government action may also contribute to investor pessimism, which could drive down prices even more.
Bitcoin price plunged to lowest point since 2020
The crash in the cryptocurrency markets this month has caused in large part by macroeconomic factors. A recent CPI figure showed that the cost of living in the United States rose 1% in May, pushing the overall rate of inflation to a 40-year high of 8.6%. While the market has a hot topic among small traders looking for quick returns, regulators have repeatedly warned that these assets pose high risk and should only be used as a last resort.
Bitcoin and ethereum price movements have closely mirrored the Nasdaq over the course of the year. The Nasdaq, which has heavily weighted towards technology stocks, is around six times larger than bitcoin. Bitcoin alone accounts for about $600 billion of the Nasdaq, while Ethereum is worth nearly $285 billion. As a result, the recent price volatility has caused investors to flee the space. Bitcoin has fallen more than three percent, falling below $30,000 this week, while Ethereum has tumbled by nearly four percent to $2,443 – its lowest point since January.
The price of bitcoin has plummeted by 80% from its all-time high, and it is unlikely that the market will see such a high anytime soon. With the economy still uncertain, the cryptocurrency market is in a fragile state. However, there are signs of recovery. Last week, Rig Karkhanis, head of Nomura’s Asia ex-Japan branch, announced that the bank had executed the first digital asset trades. Bitcoin is down 28 per cent from its all-time high of $1800. While other popular coins including BNB, XRP, Cardano, and Polkado all dropped at least thirty five per cent during the day.
Other factors that have impacted crypto markets this month include the U.S. Federal Reserve’s recent move to reduce liquidity, rising inflation, and geopolitical instability. The TerraUSD crisis has been creating ripple effects throughout the crypto industry sending prices of all well-known coins to new lows. And there are even claims that the crash was triggered by the imploding of a stablecoin called terraUSD.
China’s crackdown on crypto mining
While the Chinese government has tried to frame the crackdown as an effort to curb carbon emissions. The cryptocurrency industry has been thriving because the country has also struggled to address power shortages and a lack of government control over the internet. However, investors shouldn’t be surprised if the Chinese government ends up seizing their money. It’s an important reminder that governments can seize more than you might think.
This latest ban on crypto mining was not the first in China. It came after a similar ban in May 2013. In which the government ordered local authorities to stop offering services related to cryptocurrencies. The Chinese government also banned mining activities in Inner Mongolia and Sichuan provinces. And has promised to crack down on illicit trading and mining operations in both regions. As a result, cryptocurrency prices have crashed this month.
This latest crackdown on mining bitcoin and other virtual currencies in China has forced many of the country’s miners to shut down their operations. Many of them have begun moving overseas. Some have even relocated to Kazakhstan, according to reports by Reuters. As a result, the global computational power of Bitcoin and its rival currency Ethereum has fallen by half from its peak on April 19.
A crackdown in China on cryptocurrency mining has hit the cryptocurrency market hard, with prices plunging as much as 30% in one day. Meanwhile, the smaller rivals such as Ripple and Monero also crashed. These events have shattered hopes of a failure on China’s part, and have since rebounded 15 percent. This is a warning to investors that more declines are likely to occur.
Lack of regulation
While the price of cryptocurrencies reached an all-time high late last year, they have since fallen sharply due to fears of global economic instability. The implosion of a stablecoin dubbed TerraUSD, which has supposed to be pegged to the US dollar, also played a part in the meltdown. Stablecoins had created as a more stable means of exchange. They do not fluctuate in value and are thus meant to be more reliable means of exchange.
While pump and dumps have illegal in the stock market, this practice is not prohibited in the crypto market. Criminals use the lack of regulation to exploit the market for their own gain. Moreover, the fall in prices impacted other sectors of the economy. Bitcoin fell by more than 80 percent from it has November high, and related coins like Luna and TerraUSD were also on shaky ground. However, tether, which is increasingly important to the cryptocurrency trade, needed a major rescue last week.
Lack of regulation is a key factor that contributed to the recent Crypto Crash. While many countries have attempted to regulate the cryptocurrency industry, the U.S. government has yet to adopt any framework to govern it. While President Joe Biden has signed an executive order asking regulators to study the risks and benefits of cryptocurrency, there are no major regulations in the U.S. and other major economies. According to Garlinghouse, the U.S. government should take action now to regulate the industry.
While prices have Crypto Crash this month, Fidelity isn’t stepping away from it. The company’s spokesman said that the company continues to provide institutional consumer safeguards, investing limits, and education to consumers. In addition, the company is collaborating with regulators on crypto-related issues. Its spokesman also said the firm would not abandon the crypto market.
While the crypto crash isn’t triggering any meaningful regulatory changes. It has fueled more scrutiny and calls for clearer federal rules. In particular, the implosion of UST, a company that uses complex financial engineering to keep prices up, is attracting scrutiny. The company’s response to our request for comment was not immediately forthcoming. So it seems that lack of regulation is the reason why Crypto Crash markets crashed this month.
Speculative fervour has taken the cryptoverse by storm. Speculators have driven by the simple financial policy that makes it impossible to lose money in cryptocurrencies. However, this speculative fervour has resulted in excessive volatility, which appears to mirror the investor behaviour that borders on playing. Furthermore, the use of cryptocurrencies for real-life transactions is still minimal.
Despite the recent correction, there’s still a lot of room for bulls to invest. Several analysts have compared the Bitcoin hype to the dot-com bubble and the housing bubble. Even the CEO of Scion Asset Management has compared the dot-com bubble to the housing bubble. And some are suggesting that the current crypto bubble is just another speculative mania.
With a total market cap of less than $1 trillion. The price of Bitcoin has plummeted more than two-thirds since its peak in November. Ethereum has fallen almost 80% from its peak, while the total market cap of all cryptocurrencies has fallen below $1 trillion. While it’s difficult to determine exactly why the crypto markets have fallen. It does point to a broader trend: the lack of confidence among investors. And the lack of confidence has a knock-on effect on the stock market.
Cryptocurrency lovers say the current crash is the perfect time to buy cryptocurrency. They argue that cryptocurrencies have always experienced extreme swings in value and that now is the right time to buy them. And many crypto-enthusiasts have being rewarded handsomely when they invested in the Crypto Crash market during a panic selling frenzy. And the design of cryptocurrencies also limits their supply.