What are the reasons behind Crypto crashes in 2022?

Last updated on November 14th, 2023 at 09:29 am

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Crypto crashes

The market for cryptocurrency and blockchain goods has grown in recent years. This increase has risked investment bubbles exploding. Cryptocurrency investment peaked in 2021.

Bitcoin’s market value was $3.2 trillion in November 2021, after hitting $68,000. But 2022 proved unfavorable. After January 2022, crypto plummeted below $2.1 trillion and went downward until April. And in June 2022 market hits further low margins of economic value.

The worldwide market valuation is now $100 billion. Its worth of it has plummeted to $3.5 trillion since November.

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Since their highs, coin values have dropped 40%-80%. Solana, Dogecoin, and Avalanche have lost 89.9% of their value. Cryptocurrency is worth $861 billion now.

Bitcoin is not backed by anything physical like gold or shares of a company, which means its value might be more volatile than with such things.

Consequently, its price fluctuations are attributable only to investors’ expectations for its future performance, whether they are optimistic or pessimistic.

Because of this, the worth of a bitcoin may swing wildly, sometimes even within the span of a single day.

Multiple reasons have contributed to the current cryptocurrency market freefall. The market fall has macroeconomics such as rising interest rates, falling stock prices, inflation, with a recession.

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Conversely, several traditional investors and analysts remain sceptical about cryptocurrencies owing to the sector’s youth.

Reasons for Crypto crashes

Cryptocurrency has forever been known by the phrase ups and downs. Nowadays, someone who is not even in the cryptocurrency space also knows about it.

In short words, cryptocurrency is all about a roller coaster rise. It can be up this moment and can go down the next moment.

With so much unpredictability, unlike the stock market, analyzing whether investing in any crypto is profitable or not is quite impossible.

With cryptocurrency owning the title of a roller coaster ride and full of price fluctuations, there are also some other factors that result in crypto crashes.

In this article, we will discuss some of the important reasons that have led to a decrease in the price resulting in crypto crashes.

Ended Pandemic

The pandemic was one of the main reasons crypto crashed so many times. While the world was struggling and the finance system was down for a couple of months, it also created an impact on the cryptocurrency space, which led to the crashing of the crypto.

Experienced traders and investors using platforms like the Bitcoin Trading Platform started to cash out their money in order to avoid any loss.

The pandemic will endure until 2021. Unexpectedly but ultimately distinctive of this historical period was the effort to save money on vacations, restaurants, shows, games, etc.

Many rich families spend their extra cash on the stock market and growing enterprises like bitcoin. National and worldwide trends drove up bitcoin ownership in 2021.

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Consumers regained spending flexibility as the globe normalized. These activities returned in 2022. To restate, cryptocurrencies face a multitude of opportunities to win people’s money.

By March, the “pandemic era effect,” when many Americans invested in risky commodities like cryptocurrencies, had worn off. Once cryptocurrencies stop fueling a pandemic, they must adapt or perish.

War of Ukraine

Last but not least, it’s possible that the crypto market is experiencing a downturn because of the present situation in Ukraine.

Stakeholders’ confidence in the most conventional sense asset classes increases significantly at times of severe global crisis.

It is sufficient to remark that despite their many positive attributes, cryptocurrencies are not any of these things.

Until stability is restored in Eastern Europe and beyond, investors will remain suspicious of high-yielding but high-risk options.

Why? If anything catastrophic were to upset the global economy, these risky assets would be at the greatest risk.

Globalization Threatens

Cryptocurrencies’ promise of immunity from inflation was a major selling point when they first emerged. Many predicted that cryptocurrency prices would be steady even while the value of the dollar plummeted during times of economic expansion.

There was a common misconception that cryptocurrencies were similar to traditional inflation hedges, such as gold.

Due to rising inflation and fluctuating prices, popular cryptocurrencies like Bitcoin and Ethereum have failed in this role during the previous six months.

Author

  • InfomediaNG

    The Infomediang Team comprises a group of researchers, data analysts, and financial experts who closely follow government policies and spending. Our passion lies in empowering people to make informed decisions about their investments by simplifying data for easy understanding. Find us @infomedia_ng on X.

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