Why Bitcoin and the Crypto Markets are Falling.
Today, the cryptocurrency market is in a free fall, and the top coins are getting close to drastic levels. Today was the first time since December 2020 that Bitcoin’s price fell below $25,000. This led to a chain reaction of people selling their Bitcoin. Several financial experts had warned of a crash, and now it’s happening right before our eyes.
Yesterday, the total value of the global cryptocurrency market was around $1.10 trillion. Today, it is only around $1 trillion, which is a big drop. The important thing to remember is that by early 2020, the total value of the global crypto market had reached $3 trillion. This year, the total value of the crypto market dropped sharply, and there are worries that it could fall even more.
These may be some of the factors affecting Market prices;
The 70% fall in Celsius
Today, Celsius Network (CEL) fell by 70%, making people worry that it could be the next cryptocurrency to fall to $0, like TerraUST and Luna. The TerraUST and Luna crash hurt Bitcoin, which caused it to drop by 8 to 10 percent last month. In the same way, the crash of the Celsius token has hurt Bitcoin’s chances, causing it to drop another 8 to 10 percent today.
This month, the U.S. inflation rate jumped to 8.6, which is the highest it has been in the last 40 years. The food index went up 1.2%, the home index went up 1.4%, and the energy index went up 0.4%. The prices of all necessities are going up, which is affecting how the economy works every day.
Inflation rate rises by 8.6%
When the new inflation rate was announced, Dow Jones and the Nasdaq fell by about 400 and 800 points, respectively, and the stock market became a “sea of red.” The crypto market went down after the inflation rates were announced, and it went down even more over the weekend because a lot of people sold their coins. Also, in the last 24 hours, $200 million worth of Bitcoin shorts have been sold, adding to the chaos of the market crash.
The crypto market is like a big network, and if the price of one token drops drastically, it affects the whole economy. The Celsius crash is only the beginning.
Investors are selling their stocks more than they are buying them, which led to today’s crash. Investors’ willingness to take risks has dropped sharply, and buying pressure has dropped a lot. Even the best cryptocurrency exchanges are having a hard time because the number of trades has gone down. Top cryptocurrency exchanges like Coinbase, Rain Financials, and many others have fired workers and stopped hiring new ones.
What does this drop in price mean for Investors?
People who invest in crypto for the long term with a “buy and hold” strategy should expect price swings. Humphrey Yang, who runs the personal finance blog Humphrey Talks, says that you shouldn’t worry too much about big dips. During volatile market dips, he doesn’t even look at his own investments.
“I’ve also been through the 2017 cycle,” Yang says, referring to the “crypto crash” of 2017 in which Bitcoin and other major cryptocurrencies lost a lot of value. “I know that these things are very unstable; for example, on some days they can drop by 80%.”
Experts say that you shouldn’t invest more than 5 percent of your portfolio in cryptocurrencies. Bill Noble, the chief technical analyst at Token Metrics, an analytics platform for cryptocurrencies, says that if you’ve done that, you shouldn’t worry about the swings because they’ll keep happening. “Volatility has been around since the hills were made,” Noble says. “You just have to deal with it.”
Yang says to use the same strategy that works for all long-term investments: set it and forget it. This works as long as your crypto investments don’t get in the way of your other financial goals and you only put in what you’re willing to lose.
If this kind of big drop bothers you, you may have too much riding on your crypto investments. You shouldn’t invest more than you’re willing to lose. But even if the drop is making you rethink your crypto allocations, the same advice still stands: don’t act hastily or change your strategy too quickly. Think about what you might be more comfortable doing in the future, like putting less money into crypto in the future or buying crypto-related stocks and blockchain funds instead of buying crypto directly (though you should still expect volatility when cryptocurrency markets fluctuate). “Don’t ask about it. The best thing you can do is that. “If you let your feelings get in the way too much, you might sell at the wrong time or make the wrong choice,” says Yang.