Why is the cryptocurrency market down?

Are you too worried about the crypto market’s latest crash? 

Well, it is said that cryptocurrency is what money could look like in the future. In 2021, this seemed truer than ever as the market peaked and eventually became a rather legitimate way to invest your money. 

However, the recent downfall of the market that resulted in cryptocurrency prices crashing down drastically has understandably left investors worried. In a span of just six months, digital currencies worth more than $1 trillion were completely erased from the market, much to the shock of most investors. Even the top cryptocurrencies, Bitcoin and Ethereum are also now almost half of their value compared to what they were worth when the prices peaked around November 2021. 

How bad is the market?

• To give you some perspective as to how grave the fall is, Bitcoin which dominates the cryptocurrency market across the world, tumbled to $25,401 on 12th May 2022. This was the lowest mark for this crypto token since December 2020 and it is presently valued at $29522 per coin.
• The most recent fall is that of the digital token Luna which has reduced to a single digit value! TerraUSD that’s related to it also appears to be having a hard time and the same goes for Tether.
• TerraUSD held a market value worth $19 billion at the beginning of the year. It has come down to $1.3 billion following a massive fall that happened recently that brought its per token value under $1.
• Cryptocurrencies like XRP, Solana, Cardano, Stellar, and Avalanche have also registered a 29-39% fall since January.

How did we get here?

• There are quite a few reasons involved. You could blame it on inflation, rise in interest rates as well unstable political conditions in some areas.
• The cryptocurrency market has registered a fall overall and a lot of it can be put in the dip that came in the prices of stablecoin TerraUSD. Being linked to the U.S dollar, a crisis situation in TerraUSD’s case affected all players in the market.
• Higher rates of interest tend to build pressure on buyers to sell their assets quickly. As this happens in a rather large number, it affects the overall value of the crypto market. 

What to expect going forward?

• The market dip has kind of created two segments in the market. One segment looks at it as a golden opportunity to buy at a discount to earn profit in the long run. While another segment is now uncertain of crypto’s future after the fall in the price of stablecoins.
• No investor must ever lose sight of the fact that trading crypto is risky. At any point, the prices could fall flat to even zero, and thus, it is much wiser to set aside only a portion of your disposable income to invest in cryptocurrency.

The BTC-USD equity stands at 0.8% which is the highest ever mark that should offer some respite to crypto traders. To put it clearly, the crypto market is currently in a tunnel and light seems further away at least for now. However, traders who wish to hold long-term positions in the market should look at it as an opportunity to buy more at a less price since the future of BTC remains stable.