The year 2022 has been a challenge for cryptocurrencies. It started with facing a major low at the beginning of the year, to stabilizing through a war, and now facing a cryptocurrency crash, Bitcoins and other cryptocurrencies are in hot water. Bitcoin has lost 40% in value.
Cryptocurrency price drop recap
Cryptocurrencies are known for their volatile prices. A lot of people refrain from investing in cryptocurrencies like Bitcoin, Ethereum, and Dogecoin due to this volatility. Despite attracting major investment, Bitcoin and other cryptocurrency aspects are called as a cryptocurrency bubble by most economists. Well, you cannot disagree with this statement.
Back in 2017, cryptocurrencies and Bitcoins surged to the top. Bitcoin reached the new all-time high of $19,783.06 on 17 December 2017. Within the same month, Bitcoin faced a 45% drop in its price. Subsequently, in 2018 cryptocurrencies had a major crash. Bitcoin fell to 65% between 6th January 2018 to 6 February 28. 80% of cryptocurrency collapsed.
Again in 2021, Bitcoin prices witnessed another boom. They grew by 700% as of March 2020. Bitcoin reached $40000 and went on to grow. If you have a closer look, you can see a steep drop in the price of Bitcoins from $64000 to $49000 on 23rd April.
It was the mini-crash recorded in less than ten days. As per experts, during this time Bitcoin fell by 23%. This drop resulted in flushing down half a trillion dollars from the combined crypto market. Within the same time, most cryptocurrencies like Bitcoin faced huge drops.
During the Russia and Ukraine crisis, Bitcoin and other cryptocurrency in the global market faced a threat. However, the cryptocurrency shows a minimum recovery. The altcoins are the worst performers in case of the bubble burst. Most investors like Warren Buffet and George Soros have called cryptocurrencies a Mirage or a bubble. As you can see clearly that this continues to be a bubble, it rises to the top and crashes down.
suggested read : 5 impacts of war on cryptocurrency
Top cryptocurrency prices drop
May 2022 saw a major crash in cryptocurrencies. Especially, Tera USD stable coin linked with the US dollar with another cryptocurrency called Luna dropped to a shocking 10 cents from its all-time high of $119.51. This major collapse flushed down 45 billion dollars of market capitalization within a week.
Not just terra-luna but also other cryptocurrencies pegged the top dollar started to face a major collapse. Crypto crash 2022 is garnering major fear in the investors. As of May 19, 2022, the crypto market capitalization globally has started to shrink. For the very first time, the global market cap has dropped from $1.29 trillion to $1.24 trillion. No one expected this major crash. Also, the most famous Bitcoin price has crashed below $29000.
During mid-May, the cryptocurrency market volume decreased by 9.52% to 78.40 billion dollars. The total volume of DeFi was around $10.33 billion. It is around 13.8% of the overall crypto market. The Bitcoin price despite falling somehow managed to cross the $30000 mark in mid-May. Despite the fall, Bitcoin has managed to be a top crypto asset. In the first and second week of May, the overall Bitcoin price has been fluttering and decreased by around 10.6%.
As soon as the UST de-pegging started, Luna prices started to plummet. The bear wave wiped out around $200 billion in the crypto market. Now the question arises about the institutional adoption of Bitcoins. What are these institutions doing at this crash?
Some of the notable institutions like micro strategy and Tesla bought Bitcoins last year. Subsequently, as the prices started to fall their bet on BTC will be below the company’s purchase price. As a result, these companies began posting the losses.
Ethereum and other major cryptocurrencies have shown some improvement post the major crash. It increased by 2.72% to $2074. During the crash, the Ethereum price decreased by 15.84%. Other cryptocurrencies also faced losses and recovery. Binance coin price increased to 30 by mid-May 2022. During the crash, the price dropped by 13.7%.
XRP is ranked as the 6th biggest crypto assets in terms of market capitalization. This coin price increased by 4.99% after facing a major price drop of 21.94%.
Solana’s price increased by around 11.46% in mid-may after facing a price drop of 25.27% during the cryptocurrency crash. It ranks as one of the best crypto assets and stands in 8th position when it comes to market capitalization. Other cryptocurrencies like, dogecoin, and Polka Dot also faced major losses and show recovery.
As of 20 May 2022, the cryptocurrency prices and crypto market have gained up to 5%. The crypto market cap started trading around the 1.28 trillion mark. The overall cryptocurrency market registered a 3% growth on the last day. The complete trading volume of the cryptocurrency market reached $82.39 billion.
Reasons why the cryptocurrency is crashing
As per experts one of the major reasons for this crypto crash in 2022 is that the investors are taking more leverage. Similar to a traditional market, most cryptocurrency investors use depth methods to finance future purchases. This effectively can hit against future price drops. As a result volatility may arise in the near term and the price decline can cause the liquidation of long-term positions. This kicks off a cycle where the future holders due to price drops can start liquidating their positions. This practice leads to a major price drop.
Another reason for this cryptocurrency market crash is the lack of liquidity in the market. Whenever investor starts to liquidate a major portion of the asset it directly impacts the overall liquidity in the market. When compared to the traditional stock market the Bitcoin cryptocurrency market doesn’t necessarily have a bunch of buyers. Investors tune to buy when a major amount of coins or sold. As per experts, it is one of the primary reasons why mega institutions will not trade smaller coins.
Cryptocurrency regulations that were implemented recently also have a part to play in the cryptocurrency market crash. As of June 2021, the Chinese government banned crypto mining within its perimeter. As soon as the Ban was established, and a significant price drop and a decline in hash rate were recorded. Hash rate and the price of cryptocurrencies have a direct connection. Whenever a price declined the hash rate also declined. However, in some cases, it may act vice versa. This occurs when miners are usually paid in cryptocurrency.
The major security breaches in cryptocurrencies are also the reason for the sudden price drop. Being a new asset class very few cryptocurrencies per se provide benefits. The volatility of cryptocurrency is also impacted by crypto influencers.
There is no doubt that the crypto market highly runs on the sentiment of people. Cryptocurrency investors’ cryptocurrency prices are majorly influenced by crypto influencers like Elon Musk. When these big shot people start sweating or supporting a particular cryptocurrency the price starts to grow.
Traditionally speaking cryptocurrencies are designed to be independent assets. That is cryptocurrencies are usually not correlated with any form of the market. However, in 2022 this drastically changed. Crypto markets became much more point than traditional markets due to various adoptions.
It is true if you have a closer look the cryptos market had a 45.3% rop around may 12th at the same time the s&p 500’s also faced a decline up to 17.5%. Based on all this information it is pretty clear that crypto crashes are part of crypto investing. However, this completely relies on the investors’ risk appetite.
Cryptocurrency market crash and Bitcoin price drop
If you see the recent moments of the cryptocurrency market you can predict that it is mimicking the stock market. The stock market entered a beer stream this Friday and so did the cryptocurrency market. In the past weeks, all the cryptocurrencies have been trading in the red and faced a 20% loss.
As soon as the stock market faced a major low bitcoin was dragged alongside the risky assets. Until now Bitcoin is seen as a risky assets and vulnerable to a major loss. Pattern. Major factors like rising inflation, the Geopolitical crisis, and monetary policies implemented by the federal reserve are having a toll on the crypto markets, especially Bitcoin prices. The major reason for the Bitcoin crash as per the sum of the experts is the plummeting cost of Terra USD.
This month during the beginning as soon as the federal announced some of the changes Bitcoin spiked by over $40000. But the raise was short-lived. Since December 2021 Bitcoin has not reached above $50000. It has been trading below for a long time.
It reached the low point of $34000 in January. Presently Bitcoin is trading between $28000 and 31000. When compel to other cryptocurrencies bitcoin enter 2022 on a High note. Subsequently, it happened to face the geopolitical issues and the heat of the sanctions and revived effectively to face the crypto crash.
For investors who plan to load their money for a longer period in cryptocurrencies, these crypto crashes do not matter. The price swings are a part of the parcel. However, if people are looking to invest for a very less period, then it may have a huge impact. The higher volatility of the crypto market is usually not suitable for individual investors. As per experts’ recommendations, it is best to invest less than 5% of your portfolio in cryptocurrencies. Some of the people who are interested in investing and cryptocurrency are deep in the market.
Even if the person is planning on investing in this present cryptocurrency crash, they should not go beyond the prescribed 5% to avoid losses. Experts recommend following the golden rule that is ‘invest in what you are comfortable with losing”.
Conclusion on crypto market
There are multiple reasons for a currency crash. Factors such as invasion, inflation, and constant fluctuation have an impact on cryptocurrency prices. As you can see from the history of cryptocurrency, the sudden boom and break of the crypto bubbles are pretty evident. Cryptocurrency market crashes are part of the parcel.
The higher volatility and sudden price dips are expected in Bitcoins and other cryptocurrencies. As an investor, you stand liable to do your research and follow the expert’s advice. Never invest any emergency savings or traditional retirement funds in Bitcoins. well, it is not an advisable option.