What Is Behind The Crypto Collapse?
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Like any investment, cryptocurrency is also volatile. Over the past five years, the ups and downs have left investors wondering if it is a safe investment.
At the beginning of 2022, the price of Bitcoin was close to $50,000. However, in November, the price dropped to $16,000. As the digital currency follows a downward trend, traders and investors are forced to see what is fueling it.
That’s what we do in this article. We’re going through the research and trying to figure out what’s going on in the crypto market that’s triggering the crash.
What will happen to the value of crypto?
If you’ve been following the crypto market, you know that cryptocurrency is extremely volatile, with prices constantly going up and down.
However, it’s not just cryptocurrency that has crashed recently. As a result of the war in Ukraine, high interest rates and fears of inflation, even global stocks are experiencing major setbacks.
If we look at it as a whole, we can say that the fall of the world economy is the reason for the collapse of cryptocurrencies.
One of the recent events – the collapse of FTX – has been cited as the main trigger for Bitcoin’s 16,000% fall. FTX handles about a billion dollars worth of transactions every day.
Now that it’s gone, it’s expected that people will start to lose interest in cryptocurrencies. Experts believe that the reason behind the collapse of the cryptocurrency is the decision made by the Celcius Network to freeze withdrawals and transfers.
This decision caused a slump in all cryptocurrencies.
Ether, the second-largest cryptocurrency, followed the downtrend and reached its all-time low since 2021 after a 16% drop in value.
Why is crypto so volatile?
Unlike corporate stocks and shares, where price movements are determined by company and business performance, there are no assets backing cryptocurrencies.
Consequently, price fluctuations cannot be controlled. The only way a cryptocurrency’s price is determined is by traders and investors’ faith in them.
Overall, this means that cryptocurrency price movement is purely based on speculation as to whether or not the price will rise and fall.
You can see such drastic fluctuations in the prices of Bitcoin and other cryptocurrencies because people speculate on price fluctuations and make buying and selling decisions.
Currently, inflation and the higher cost of living crisis are forcing people to reduce their risk through investments.
Has Crypto’s Bubble Burst?
It’s really hard to say whether a crypto bubble has ever burst or not. However, what we’ve seen over the past five years has certainly exploded to the point. Perhaps this is why most traders and investors avoid cryptocurrencies as an investment portfolio.
Traders and investors have lost their confidence. And this loss of confidence has caused the price to collapse.
- In 2021, the price increased by 700% and reached an all-time high of $69,000.
- Fast forward to November 2022 and the price has dropped below $17,000.
When an asset goes up quickly and easily, it usually increases the likelihood of it going down. Unfortunately, this is what happens in the cryptocurrency market.
Bitcoin took 11 years from its launch to reach $20,000. But only three weeks to double itself.
Where the crypto market is going is unpredictable. But one thing is for sure, with institutional investors getting involved, we might see better crypto regulatory practices. If that happens, the cryptocurrency could hit a new all-time high next year.
Is the crypto market going up?
Investors who have invested in the cryptocurrency consider it a diversifier to balance their portfolio. If you go back and check, cryptocurrency did no better than stocks during the pandemic. This is because investors panic and sell everything.
In the first two weeks of the pandemic, Bitcoin fell by 40 percent. Despite this, crypto recovered faster than other assets. If you are interested in investing in Crypto, it is recommended to follow sites like bitcoin-billionaire-pro.com/es. Here you can get all the updates and information to make a good decision.
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