Bitcoin year-to-date return has come down by 40 per cent while Ethereum is down by 50 per cent. Bitcoin is currently trading at $28,954, down from the highs of nearly $68,000. Crypto markets are in turmoil. Liquidity has dried up due to central banks hiking rates due to which trading activity in cryptos has fallen and so have their prices. Bitcoin’s price dropped back below $30,000 as the crypto and stock markets struggle to regain upward momentum.
· The price of bitcoin plunged below $26,000, hitting its lowest level in 16 months.
· Ether, the second-biggest digital currency, tanked below $2,000 per coin.
· The collapse of stablecoin terraUSD has led to fears of a broader market contagion.
A Lot of reasons caused the crash of the crypto markets, we conclude some opinions as below.
· Crypto investors taking on too much leverage.
· Lack of liquidity in cryptocurrency markets. Crypto markets are in a freefall and liquidity has dried up. The biggest problem the crypto markets face when leveraged investors liquidate a large portion of their assets is the overall liquidity of the markets. Unlike in the stock market, there aren't always a bunch of buyers waiting to snatch up unloaded coins. This is part of the reason why crashes tend to occur over weekends for crypto.
· Cryptocurrency regulation.
· Crypto security breaches causing fear. Blockchain and network security are other factors that could cause a crypto crash,
· Crypto influencers causing volatility.
· Cryptocurrency correlations with the stock market. Part of the beauty of crypto is that it should be an uncorrelated asset. In other words, it should float freely, divorced from the rest of the market. But, as 2022 has proven, that's often not the case.
· Present crash are macroeconomic factors and weak global cues that also weighing stock markets down globally.
· Developments in the macro-environment such as increasing inflation, raising of interest rates by the Federal Reserve, the Russia-Ukraine war, etc. It is also interesting to note that the crypto markets are mirroring the traditional financial markets as both are seeing a correction.
What Does This Price Drop Mean For Crypto Investors?
For those who invest in crypto for the long-term using a buy-and-hold strategy, price swings are to be expected. Big dips are nothing to be overly worried about. For those who invest in crypto for the short-term, the holding time of crypto should be controlled wisely.
Exchanges To Buy Cryptocurrency
To invest in crypto for the long-term, you need to choose a reliable exchange. There are some popular platforms to buy cryptocurrency include Binance, FTX, Bitfinex and Coinbase.
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