When Is The Crypto Crash Coming to An End?
Did Cryptocurrencies Fail Investors?
The crypto market has been touted as the investors’ haven from inflation and the harsh economic realities. However, the recent market crash has brought investors to a rude awakening. While the value of the cryptocurrency market has plummeted, it has also violated investors’ faith in these assets, who had hoped they would provide some economic security.
Currently, the historic bull run of 2021 seems like a distant past as coins such as Bitcoin, Ethereum, and Litecoin have lost all of their gains achieved during their historic bull run in 2021.
Did the crypto industry suddenly go into oblivion? Bitcoin and Blockchain are about the most hyped words of the century; what happened to the digital currency that was once hailed as the next big thing? Is this the end for cryptocurrencies? What will the future hold for crypto investors around the world?
See also: Does Technical Analysis Make a Good Trader? (Technical Analysis For Beginners)
A Global Financial Crisis.
The stock market has likewise fallen as the US government tightens the monetary supply and raises interest rates to combat inflation. Cryptocurrency has been particularly badly hit as investors have turned their focus away from more risky investments. As a result of the decline in Bitcoin values, banks and other major businesses in the region are feeling the squeeze. The value of digital assets can fluctuate dramatically, and this has happened in the past. Remembering a few well-known investment principles can help cope with crypto meltdowns.
To “stabilize liquidity” under “extreme market conditions,” crypto lending company Celsius said on June 12 that it had suspended all withdrawals from its lending platform. Celsius’ native token, CEL, plunged 70% in a single hour after the announcement; by the following day, it was trading at nearly 40% down. Bitcoin fell to levels not seen before 2020, and crypto’s overall market capitalization plunged to less than a trillion, or more than two-thirds of the $3 trillion all-time high.
Deposits in Bitcoin (BTC -5.61 percent) and Ethereum were often rewarded with double-digit interest rates through Celsius, which loaned out the funds. Temperatures in the cryptocurrency market began to plummet in mid-June, and Celsius was forced to freeze withdrawals due to the panic.
After Celsius announced on June 13 that withdrawals would be halted, Celsius’ CEL token went into freefall. Other cryptocurrencies appear to have followed suit but with less dramatic losses.
See also: 10 Must Have Cryptocurrencies In 2022.
Problems with the UST.
After Terra’s demise in May, Celsius is now in the same predicament. As a result of the market volatility, the platform’s dollar-pegged stablecoin (UST), designed to earn 20 percent on Anchor, collapsed to zero. As a result, the pegging algorithm could not keep up with the massive outflow of UST being burned to mint LUNA. The extinction of an entire ecosystem was unavoidable.
The collapse of Terra blockchain: a $60 billion loss, a devalued ecosystem, and a defunct platform coupled with the crypto market that had already plunged 71 percent from its peak, caused $2 trillion to go up in flames; a domino effect of the Luna/ UST crash.
The question on the minds of many investors now is, how long will the crypto market be in a state of crisis?
Crypto winters have a long history.
At least four times, the crypto market has dropped by 50% or more, including the current collapse. The first crypto winter should better be referred to as a Bitcoin winter, as Bitcoin represented more than 95% of the market until 2013.
The Lowest Points in Bitcoin’s History
Here is a list of the worst percentage-based crashes in the history of Bitcoin.
- 2011 Market Crash (June — November)
The market fell by 93%. Bitcoin saw its first dramatic crash in 2011 when it fell from $29 to $2. A more dramatic crash (93 percent) has not occurred since.
The hacking of Mt. Gox, the leading centralized crypto exchange in crypto’s early days, was a major cause of this cataclysmic fall. A hacker acquired access to Mt. Gox user accounts and was able to “crash” the price of Bitcoin to $0.01.
2. 2012 Market Crash (August)
The market fell by 56%. Investing in cryptocurrency had been exposed as a Ponzi scheme by the public in August of that year. The thief — ultimately accused, convicted, fined, and imprisoned — had taken 700,000 Bitcoins by fraud, promising extraordinary rates of 7% monthly interest.
3. 2013 Market Crash (April)
In 2013, Bitcoin gained substantial popularity in the mainstream media, and new investors flocked to the market. Bitcoin was on fire, rallying for four months before peaking at around $260 on April 10. The price suddenly plummeted, and the previously stated Mt.Gox struggled to handle the huge volume of trading, adding to the uncertainty.
Cyber attackers seized the opportunity to cause even more havoc by launching DDoS assaults against Mt.Gox. While Bitcoin was probably due for a correction anyhow, the upheaval surrounding Mt.Gox added to the selling pressure. It showed the various risks of depending on a single entity as the Bitcoin ecosystem’s center.
4. 2017–2018 Crash (December to December)
The market crashed by 84%. For Bitcoin, 2017 was a monumental year that saw the cryptocurrency break all of its records and reaches a high of almost $20,000. It all came crashing down on December 27 as investors reaped the benefits of a clear bubble and pushed the price down below $12,000 per coin. Major cyberattacks in Korea and Japan and speculations that these countries planned to ban Bitcoin sent already wary investors fleeing the cryptocurrency market in 2018.
5. 2020 Market Crash (February — March)
Despite the pandemic, the market collapse in March 2020 was even worse for the Bitcoin market. In two days, Bitcoin lost half its value. February’s high was over $10,000; March’s low was around $4,000.
The immediate cause of the crypto market fall appeared to be a big investor sell-off prompted by heightened inflation fears. In addition, investors continue to avoid risky assets, which is reflected in the stock markets.
6. 2022 Market Crash
In June 2022, the crypto market saw its second meltdown of the trading year.
In May, the failure of Terra Luna erased $500 billion from the cryptocurrency market. Since January 2021, the market capitalization of the cryptocurrency business has fallen below $1 trillion for the first time in June 2022.
See also: Decentralized Finance (DeFi) vs Centralized Finance (CeFi).
Pressures on the economy at large
The Federal Reserve of the United States raised interest rates twice during the third quarter to combat rapidly rising prices. As a result, many people in the United States and elsewhere are worried about a recession.
It has also taken a toll on the stock market, particularly on high-tech companies. During the second quarter, the tech-heavy Nasdaq Composite lost 22.4 percent, the worst quarterly performance since 2008.
The price movement of Bitcoin has been strongly associated with that of the major U.S. stock indices during the past few years. As investors flee hazardous investments, the stock market sell-off has dragged on bitcoin and the crypto market.
Is it possible that cryptocurrencies will make a recovery?
Cryptocurrency has a history of surviving major downturns. Yes, it’s horrible, but winter comes before spring, and that’s why Investors are hoping that the market will thaw, and they can sit this one out.
Conclusion
Although they have entered the bearish area, cryptocurrencies are not yet dead. The price of these coins may rise even though they have no inherent value, unlike shares in a company, since investors believe that Bitcoin’s price will reach $100,000 in the near future.
Some of these claims may be overblown, and regulatory restrictions may impede any such progress. However, the market has had a history of recovering from its previous crashes and this one will be no different.
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