Cryptocurrency doesn’t need any introduction now and has been called the future of money for the last few years. Most of the financial dealings are being carried out in the crypto ecosystem. Last year the crypto market saw new heights and gained more legitimacy.
Over the last six months, a continuous decline has been seen in the crypto market, which wiped out more than $1 trillion worth of digital money. Such an alarming situation has posed serious questions about investing in cryptocurrencies.
Bitcoin, the biggest and most popular cryptocurrency, fell below $22,000, while almost all altcoins, starting from Ethereum, bled likewise.
All the crypto lovers are bound to think over this burning market but cannot find the exact reasons. Maybe these handful of factors are to be blamed:
The Role played by Inflation:
· Rising inflation, interest rate hikes, and geopolitical instability caused by the Ukraine war could be partly to blame. As a result, the crypto prices went very down and, most probably, worse.
· Shivam Thakral, CEO of crypto exchange BuyUcoin, said that the rising food, gas, and energy prices are putting tremendous pressure on the crypto market.
The Basis of Crypto’s Value:
· The recent decline is also being attributed to comments made by Bill Gates on Reddit, in which the Microsoft founder said: “I like to invest in things that have value. The value of companies is based on how well they make great products. The crypto value is based on what one person decides how much another person will pay for it.”
The Role of China:
· A further blow was seen when China ordered Bitcoin mining in its Sichuan province to shut down completely and told banks to stop supporting crypto transactions in the latest wave of restrictions on cryptos.
The Downfall of Other Coins:
· Another reason for the recent crash in the crypto market is the downfall of the stablecoin TerraUSD. The TerraUSD crisis has rippled through the crypto industry and significantly sent prices of almost all well-known coins down.
Stock Market & Crypto:
· An Equity market also plays a very significant role in the value of crypto. They both hold a direct relation to each other. Hence, when the stock market falls, the value of crypto also sees the trend in the same direction.
· Several factors affect the stock market, and these factors, in a similar fashion, affect the worth of crypto as well.
· Between 2022 and the end of 2021, a fall was seen in the stock market of about 6%, resulting in the downfall of crypto as well.
The Role of Celsius Network:
· Celsius Network is a decentralized network that announced in 2022 that it would be freezing all the transactions related to crypto, which is a market condition called “extreme market condition.” Due to the shutdown that has resulted, a high rate of sell-off was seen, leading to a cryptos plunge.
The Role of Regulatory Framework:
· In 2022, the behaviour of the crypto’s worth is going on and off. It is evident from the fact that the crypto market fell in January. However, in February, the market again rose. In the global market, crypto is under scrutiny as the world government tries to regulate them.
All in all, the crypto market has been falling due to the mentioned reasons. However, this is a subjective opinion based on facts. What we can do in such a situation is to hope for the regain of the lost worth of crypto. If you think there are other reasons for its downfall, pour in the comments, as it would be great to strengthen my perception.