The cryptocurrency market has literally been in a bloodbath over the past few days. Bitcoin, the world's most popular cryptocurrency, is near the $25,000 level, down sharply from a high of $69,000 a day earlier. Other altcoins also experienced declines, bringing the global cryptocurrency market capitalization down to $1.12 trillion. Major cryptocurrencies such as Ethereum, Solana, and Cardano fell by double digits and the market took a direct hit. But why has the cryptocurrency market plummeted so much?
The reasons are varied. Starting in 2022, some of the cryptocurrencies hit all-time highs over the past few years and started trading in the red before spiraling downward since then. The decline at the beginning of the year was mainly due to the new wave of the pandemic and the developments in the global economic scenario due to geopolitical tensions and inflation when the situation began to stabilize.
?The severe decline we are seeing in cryptocurrencies is a global phenomenon. This can mainly be attributed to developments in the macro environment, such as rising inflation, interest rate hikes by the Federal Reserve, the Russia-Ukraine war, etc. It is also interesting to note that the cryptocurrency market reflects traditional financial markets. Because both are looking at corrections. This indicates that the cryptocurrency market is maturing. Like any other market, cryptocurrencies have their downs and ups and we are currently experiencing a downturn. said Nischal Shetty, Co-Founder and CEO of WazirX.
?The Crypto Fear And Greed index was in “extreme fear” territory, indicating investors were too worried and were selling their holdings to minimize losses. What triggered the bearish sentiment was the Federal Reserve's announcement that interest rates would be raised by 0.5 percentage points. Market participants began to panic about inflation and a potential recession, causing stock and cryptocurrency markets to plummet. Darshan Bathija, CEO and Co-founder of Vauld, said:
Bitcoin feels the heat
The price of Bitcoin, which hit an all-time high in 2021, plummeted near the $25,000 level on Thursday after continuing to decline over the past week. The world's most popular cryptocurrency lost 30% of its daily value on the day as market participants panicked over a variety of issues.
?Bitcoin fell to the $25,000 level yesterday but stabilized near the $29,000 level later in the US trading session. With BTC, most altcoins have also seen sharp declines. Batiza said.
?Data shows that BTC exchange inflows have remained relatively high over the past few days. Investors often transfer their holdings to exchanges when they want to sell. He added:
Luna is way out of the top ten.
At the time of writing, Luna ranks 230th in the cryptocurrency index according to CoinMarketCap and is valued at $0.00003872, down 99.99% from its stable valuation of $88. The Terra blockchain was shut down due to extreme volatility. ?The Terra blockchain officially stopped at block 7607789. Terra said on Twitter on Thursday:
?Terra (LUNA) has had a stormy week, with the token plummeting at an alarming rate. It all started when TerraUSD (UST), Terra's algorithmic stablecoin pegged against the dollar, plummeted to nearly $0.6. Accordingly, global cryptocurrency exchange Binance temporarily suspended withdrawals of UST and LUNA. All of this had a knock-on effect on the price of LUNA, sending it spiraling out of control. The LUNA daily chart broke below a rising channel pattern. WazirX Trade Desk said:
?Additional to the current market instability was the unpegging of the stablecoin UST. As depegging intensified, the price of LUNA plummeted to $0.009598. Due to rapid price declines and high inflation, the LUNA team, Terraform Labs, decided to briefly shut down the blockchain and restart it after implementing a patch. This was done to prevent governance attacks. Batiza said.
Should I buy dip?
Cryptocurrency market experts are mostly of the opinion that they will buy dips because they are hopeful that the market will rebound.
?Investors should take advantage of this downturn and start looking for opportunities in the market. This is a good moment to invest. This is not the first time the cryptocurrency market has suffered massive losses and recovered to emerge stronger than before. Will the same thing happen this time? said Kumar Gaurav, Founder and CEO of Cashaa.
?In light of the high bearish sentiment in the market coupled with high volatility, individual investors are trying to minimize their losses or buy the dip. Choosing the right exchange to store your assets can make a big difference in volatile situations. Buying and holding cryptocurrencies until the price rises is a great investment strategy, but you can also earn passive income with cryptocurrencies until you decide to sell them. advised Bathija.
Read all the latest India news here.