What is happening to the Bitcoin? Why it is crashing?

Bitcoin, one of the most popular cryptocurrencies fell drastically in last few days owing to a depression in the whole crypto industry.

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Bitcoin crashing
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Few weeks ago, when I looked at my phone under the crisp spring sun, I was taken over by panic. The cryptocurrency market had crashed; all of my investments were down significantly. After few moments, I exhaled and said, “It’s a volatile market, it will recover soon.” But till day the slump in the market is still there. Almost all cryptocurrencies including big players like Bitcoin and Ethereum are dwindling with their values decreasing with each passing day.

The market which was at its peak with 70000 USD value level during November 2021, is experiencing its lowest value currently. According to data from CoinMarketCap, the two top cryptos – Bitcoin and Ethereum have seen very significant falls. While Bitcoin fell below the 22,000 USD level, Ethereum reduced to 1155 USD level.

Digital gold has now lost 33 percent in the last seven days, a fresh blow to its supporters’ claims of its ability to act as a store of value,” stated an article on Investing.com.

With all of its risks and volatility, crypto is regarded as one of the most volatile financial tools. Ethereum lost 10.5 percent value this week, bringing its weekly loss to 43 percent, as the collapse of crypto lender Celsius Network continues to send shockwaves through the ecosystem of linked tokens.

According to experts, this is due to the overall world climate. Things aren’t looking bright simply in the crypto world. The crypto price drop indicates that the investors’ risk appetite is declining. A recession is looming, inflation is skyrocketing, interest rates are rising, and living expenses are rising. Stock markets are also trembling. As a result, even wealthy investors are less free with their funds and many ordinary investors have less money to invest in anything.

In these uncertain times, many people believe that investing in something as volatile and unpredictable as cryptocurrencies is a risk too large.

“The crypto market has been under pressure from the Federal Reserve, hiking the interest rates to combat inflation over the past few months. Bitcoin, Ethereum, and most cryptocurrencies suffered losses over the weekend after a broad sell-off following the data showing US inflation hitting a 40-year high,” said Edul Patel Co-Founder and CEO of crypto investment platform Mudrex to Financial Express.

There is no near-term respite in sight for the carnage in the crypto market. Investors have lost over 2 trillion USD (Rs 15.65 lakh crore) over eight months. Comparison of the notional value lost shows that only eight countries have a GDP more than the crypto market loss in less than three quarters. The total market capitalization (m-cap) of the digital market is marginally above the 1 trillion USD mark, which was more than 3 trillion USD at its peak in November 2021.

Some market participants say that the weakness of crypto market is related to the traditional asset class.

“After the consumer price index reported the highest inflation since 1981, financial markets across the globe have seen a sharp downturn. The rising food, gas, and energy prices are putting tremendous pressure on the crypto market. The market is expected to remain choppy in the coming weeks and the globe continues to report high inflation numbers,” Shivam Thakral, CEO, BuyUcoin said to The Economic Times.

 Anndy Lian, Chairman, BigONE Exchange stated to The Economic Times that the weakness is amplified by traditional institutions who were here just for short term gains.

“The quick outflow of money left us high and dry. We saw a global economic slowdown amid inflation and war, which then resulted in weaker demand. There are liquidity issues and could result in unsustainable annual per cent yield,” he added.

Experts say that the stabilisation of the market is a matter of waiting and in vestment

An article in BBC stated, “In a nutshell – in order to stabilise it, people who still have Bitcoin would need to hold on to it and others would need to start buying it again. This has happened before. Crypto fans will tell you now is a great time to buy, because it’s cheap – and you then have to sit tight and watch it turn the corner. This is how it’s always worked.”

Related: Why Are Crypto Markets Crashing? What Do Investors Need To Know About It And How To Protect Themselves

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