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Even if you don’t live and breathe cryptocurrency, you’ve most likely observed some upheaval in the market. All the media’s attention is drawn to the prices of cryptocurrencies plummeting over the last few weeks. It all started when Bitcoin began to lose its value after the war broke out in Ukraine, hitting a fresh 40-year high in the stock and crypto markets, crashing the whole world’s economy.
The current crypto crisis shows little signs of abating, leaving the industry in a state of uncertainty. According to CoinGecko data, Bitcoin, the most popular digital currency, has dropped nearly 10% in the last 24 hours to $20,737.24 – a historic low for the world’s first cryptocurrency. In the previous seven days, the price has dropped by over 34%. Prices have dropped to their lowest level since December 2020.
The crypto market has reached a new low, with many cryptocurrencies at their lowest point this year. There is an obvious correlation between rising inflation rates and dwindling cryptocurrency values, but what’s really going on and why?
A recession is looming, inflation is skyrocketing, interest rates are rising, and living expenses are soaring. Global stock markets are also trembling as a result of the Ukraine conflict, inflationary fears, and increasing interest rates, which will make it more difficult for firms to borrow money. This has spilled over into the bitcoin market, along with concerns about additional regulation.
As a result, even the most wealthy investors are less free with their funds. And many ordinary investors—not wealthy hedge-fund owners or businesses, but regular people like you and me—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 great. Because it is unregulated and unprotected by financial regulators, if you invest in it with your funds and it loses value or you lose access to your crypto wallet, your money is gone.
With rampant inflation continuing and the US Federal Reserve anticipated to raise interest rates this week to contain increasing prices, macro issues are contributing to bearishness in the crypto markets. The Nasdaq, which is heavily weighted in technology, fell dramatically last week. Bitcoin and other cryptocurrencies have a history of being linked to stocks and other high-risk investments. When these indices decline, so does crypto.
Bitcoin has recently been volatile, surging and dropping significantly in response to a number of news headlines. However, it is not the only cryptocurrency to have seen recent turmoil.
Celsius, adding gas to the fire!
Celsius Network, a crypto lending company, declared on Sunday that it had frozen all cryptocurrency transactions due to extreme market conditions, sparking fears of contagion into the broader market. Following the shutdown, there was a massive sell-off in which all cryptos plummeted.
According to Reuters, as of May 17, the company had processed $8.2 billion in loans and had assets totaling $11.8 billion, according to its website. It stated in August of last year that it had assets worth more than $20 billion.
What can turn things around?
In a nutshell, people who still have Bitcoin would need to hold on to them, while others would need to start buying it again in order for it to stabilize. This has happened in the past. Most crypto enthusiasts will tell you that now is a fantastic time to buy because it is cheap – and then you must wait for it to turn the corner. This has always been the case.
Cryptocurrencies are the only asset class today that is not subject to government meddling. The ability to trade cryptocurrencies like stocks and bonds, as well as use them for everyday purchases, is a very attractive feature of these currencies.