Crypto Crash Reason (6/13): Why does Crypto crash today?
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What is Cryptocurrency?
If you’re new to cryptocurrency, you may be asking: What is Cryptocurrency? A cryptocurrency is a digital form of money that can be exchanged person-to-person on the internet. Transactions happen quickly and are often free of middlemen. This is similar to the Wild West of the digital world, except that there’s no marshal to uphold the law. Imagine how easy it would be to hire someone and pay them in cash, and not have to travel to the bank to make an official transaction.
Why is Crypto Crashing Today?
Increasing Interest Rates: The decline of cryptocurrencies started last November and has continued into today, with Bitcoin and Ethereum both down more than 25%. These declines come as the Federal Reserve is looking at increasing interest rates and winding down the economic stimulus faster than previously expected. As a result, the market is oversupplied, which is bad for cryptocurrency prices. The more BTC drops, the more traders will sell other coins to offset the losses.
Ban on Coin: The collapse in BTC was attributed to the tightening of Chinese regulatory rules, including a ban on initial coin offerings. The People’s Bank of China has threatened to revoke the license of firms that conduct such operations, and this ban has slowed the market down. As a result, a recent price crash in Bitcoin and Ethereum has resulted in an overall market crash of more than 50%.
Primary Source of Income: Experts suggest that investors shouldn’t sink too much of their money into cryptocurrency, as it is volatile. Financial advisors recommend clients focus on other priorities, and crypto investments shouldn’t interfere with these. According to Nate Nieri, CFP at Modern Money Management in San Diego, “Investing in crypto shouldn’t be a primary source of income.”
Emotional Distress: While these drops can cause emotional distress, they should not discourage you from making crypto investments. Experts suggest keeping crypto investments below 5% of your overall portfolio and not fretting over price swings. Instead of investing all of your money into cryptos, diversify your investments by buying stocks tied to cryptocurrencies. This way, you can reduce volatility. Then, you can invest in a range of other assets. But keep in mind that the price of cryptocurrencies is highly volatile and will fluctuate in value over time.
How Top Crypto Prices Have Fallen in the Crash?
The recent fall in cryptocurrency prices is similar to other recent crypto crashes. While the Federal Reserve cut interest rates to combat inflation, it did not outright ban the ownership of individual cryptocurrencies. In 2021, the Federal Reserve cut liquidity for cryptocurrencies, and many cryptos have experienced a significant decline. For crypto investors, the recent dip should not be cause for concern. One financial expert recommends not checking investments during volatile times, such as during a crash.
The Other Reason for Crypto Prices to Fall is Fear of the Economy
Is Bitcoin in the Oversold Zone?
It seems that everyone is wondering: is Bitcoin in the oversold zone? After all, the market has seen $400 billion in losses in the last few days, with the total market cap sitting at under $1.7 trillion. In the last week alone, most coins have suffered significant losses – Ethereum has dropped 27.8%, BNB is down 17.6%, and ADA is down 36.2% – while Bitcoin has lost almost 20%.
There are many reasons for a cryptocurrency market crash, and a number of the most prominent have been discussed recently. Bitcoin has fallen by more than 50% since its November 2021 high, and the entire cryptocurrency market is suffering. The most popular altcoins, including Ethereum, Zcash, and Litecoin, all suffered sharp declines, and even Tether (USDT) has lost its peg to the dollar. The crypto markets have lost nearly $600 billion over the last week, and a major part of the crash has been caused by a massive sell-off.