The reasons behind the recent crash in crypto prices have varied, but they can be boiled down to three primary causes: market volatility, Regulation, Taxation and Value systems. Listed below are the main reasons why Bitcoin is in decline. Read on to discover what you can do to avoid being one of them. Cryptocurrencies are a great way to store value and are increasingly popular among people from all walks of life Cryptocurrency Crashing.
Market volatility
If you are concerned about the value of your cryptocurrency, the question is, why is the largest cryptocurrency crashing? The market is already experiencing panic. Some people are comparing the current situation to a bank run. In reality, this crash has more like a stock market crash, where investors have worried about the value of their investments. This isn’t the first time that the cryptocurrency market has experienced such volatility. Here are some reasons why the market is crashing.
The cryptocurrencies have recently suffered a steep decline, falling as much as 30 percent in a week. While many have recovered from their losses, many have seen significant declines. This has possibly the result of a financial attack on the TerraUSD, which is supposed to match the US dollar. The cryptocurrency currently trades for 18 cents. The attack involves several trades and can cause substantial gains for the attacker. That’s why stablecoins are in the spotlight now.
Some investors have a high-risk tolerance. This has because the price of cryptocurrencies has been correlated with the stock market. And the stock market has been in turmoil in recent months. Some crypto investors have even used debt to finance their futures positions. In addition, miners use debt to hedge against price drops. Because of this, the price drop could make them liquidate their long-term positions or futures positions, resulting in further declines.
In addition to the Celcius announcement, the selloffs in the largest cryptocurrency, Ethereum, have also coincided with declines in traditional assets. As investors seek to get rid of riskier assets, they have also spooked by the Federal Reserve’s looming interest rate hike. The Fed has expected to raise interest rates by a larger amount than usual, possibly even by one percentage point. The announcement comes amid reports of inflation in the U.S. and Russia’s continued military intervention in Ukraine.
Regulation
Despite widespread criticism, the recent Cryptocurrency Crashing has prompted more regulations. SEC Chairman Gary Gensler recently said that the Cryptocurrency Crashing has highlighted the need for greater investor protection. The prices of bitcoin and ether have fallen more than 30% in June.
A recent SEC action was against crypto lending company BlockFi, which settled charges that it offered an unregistered security. The regulator’s comments on the crash come as cryptocurrency prices continue to plummet.
Markets are in a downturn, with global stocks suffering due to inflationary fears and the war in Ukraine. Moreover, as interest rates rise, the cost of borrowing money will also increase. The recent regulatory fears have weighed heavily on the cryptocurrency market. As a result, the price of bitcoin and other digital assets fell sharply in the beginning of December. In January, it was trading at $35,000 per coin, while it hit a low of $29,000 in May. The recent market crash shows that bitcoin has a long way to go to recover from this setback.
While cryptocurrency prices reached dizzying heights in November, the Cryptocurrency Crashing has resulted in a half trillion-dollar decline in market value. The crash has re-ignited calls for more regulations. Despite the shaky foundation of the cryptocurrency market, many companies have tied to it, and traditional financial institutions are also dabbling in it.
Banks, in particular, have warned not to offer unhedged crypto exposures and speculative products based on the digital currency market, as there has limited historical data to back them up.
Regulators are clamoring to regulate the cryptocurrency industry to avoid any potential instability in the future. But despite this growing concern, 88 percent of cryptocurrency exchanges surveyed by Mistertango have said that they want industry regulation, although they are cautious about over-regulating the market. The absence of regulatory oversight in the cryptocurrency industry has the most significant challenge the cryptocurrency industry will face, and it needs to be addressed sooner rather than later.
Taxation
In the past 24 hours, prices have plunged dramatically, with the Polkadot (DOT) and Avalanche (AVAX) both down more than 15 percent. These coins rank 13th and 16th on CoinMarketCap, respectively. The price of Polygon (Matic) dropped by 15 percent to $0.439 in the same period, leaving it ranked 18th. Tron (TRX) also fell significantly, declining 15 percent to $0.06395 in the past 24 hours. It has currently ranked 13th on CoinMarketCap, down from its peak of $910 in August.
Even though Bitcoin has plummeted to a five-year low, the crypto market has still valued at more than $1 trillion, less than a third of its peak in November. And few cryptocurrencies created since 2009 are worth billions of dollars. This volatility is not surprising given the nature of cryptocurrencies and the intersection between emerging technologies and conventional money. Regardless of its origins, the Cryptocurrency Crashing is a complex combination of factors.
China’s ban of crypto services, although it didn’t prohibit individual ownership, hurt prices. Meanwhile, the Federal Reserve has reduced liquidity. As a result, many cryptos have been on a steep downward trajectory. The collapse of the TerraUSD coin in May 2022 prompted a “bank run” and a subsequent plunge in other cryptocurrencies. Traders feared the cryptocurrency didn’t have enough crypto assets to back peg to the dollar, and the news spread across the crypto world.
Leverage
Cryptocurrency is becoming a major financial force in recent years, with the market currently worth around $1 trillion. However, it has declined considerably from its high in November, with some coins now worth billions of dollars. In fact, the market remains volatile despite the regulated nature of conventional money. Its volatility stems from the fact that the technology behind cryptocurrencies is relatively new, and because it is at the intersection of emerging technologies and conventional money.
During the first week of May, the cryptocurrency market fell by around 30%. While some cryptocurrencies recovered, the total market lost about $500 million in a week. The market crash may have triggered by a financial attack involving the cryptocurrency Terra, which is supposed to match the US dollar. The attackers of this cryptocurrency are able to gain a large amount of money by making multiple trades in a single day, resulting in a massive Cryptocurrency Crashing.
The Federal Reserve has been reducing its liquidity in the cryptocurrency market as part of its fight against high inflation. The recent ban on Crypto Exchange in China didn’t seem to help, but it did sting prices. The Fed has also cut the amount of liquidity available for the cryptocurrency market, and that’s caused a significant downturn.
This trend has continued into 2022. In May 2022, the currency TerraUSD plummeted during an old-fashioned “bank run,” as traders feared that the crypto crash didn’t have enough assets to back peg to the dollar. The news spilled into other cryptocurrency markets.
In the last 24 hours, two of the largest cryptocurrencies, Bitcoin and Ethereum, have both seen large drops. This drop coincided with a downturn in traditional assets as investors sought to unload riskier investments in light of rising inflation. The Fed has also expected to hike interest rates at their meeting next week, putting more pressure on crypto markets. This may be an indication that regulations need to be implemented. If these worries have unfounded, then regulators must act quickly to ensure that the market doesn’t go haywire.
