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Why Bitcoin and Cryptocurrencies Keep Cracking?

Bitcoin fell sharply on Monday and dropped below $30,000 for the first time since July 2021. The world’s largest cryptocurrency is worth less than half its value in the fall. Other cryptocurrencies, Ether and BNB, experienced similar declines. Trading volume also declined on significant exchanges. Some experts are now warning about “crypto winter,” In which the astonishing growth of the sector was replaced by an extended period of contraction.

The current slide in Bitcoin and other cryptocurrencies is because of a combination of short-term and long-term input, Including larger financial markets and a major Stabilcoin crash. Crypto Evangelicals have long hoped that the independent nature of Crypto would increase it in the face of inflation and crises. The number one cryptocurrency, Bitcoin, has no central issuer or authority to control it. Many argued that independence from the government should ensure that Bitcoin would retain its value through economic downturns, international wars, or drastic policy changes.

However, it has been proven to be wrong over the last few years. When the coronavirus pandemic devastated global markets in the spring of 2020, Bitcoin fell 57%. Then stock exchanges and cryptocurrencies revived and grew at a staggering rate. Analysts say this was caused by a combination of leisure, disposable income, and money caused by the pandemic, which governments have introduced to the world. However, investors have been wary that change is in the air recently. Inflation has forced the Federal Reserve and other central banks to raise interest rates.

Bitcoin and Crypto Perspective

The Bitcoin drop comes after the Dow and Nasdaq’s worst one-day drop since 2020. The market is disorganized due to Russia’s invasion of Ukraine. This has exacerbated inflation, supply chain problems, and oil prices. The slow growth in China amid the spread of COVID-19 contributes to financial anxiety. Some crypto-evangelists suggest that the price of Bitcoin will disappear from the stock market; However, for the time being, the situation is very uncertain.

Even the most significant crypto enhancers will tell you that success in the crypto world is not guaranteed. It is instability that is part of the attraction for many speculators; they could make money much faster than conventional stock brokers.

Since the founding of Bitcoin in 2009, there have been several significant cycles of falling and bulls; Short-term investors alternately glorify the market and then lose interest. Many exchanges, especially during the high period, offer substantially risky offers. This allows traders to invest in cryptocurrencies borrowed. If prices start to fall, be it for the sale of shares of large investors or other reasons, a Lack of actual cash flow can lead to an even faster free fall.

According to crypto firm Grayscale Investments, the number of people investing in Crypto at any given time is also highly variable. More than half of the traders who owned cryptocurrencies at the end of 2021 only entered that year. It is no coincidence that Crypto crashes usually happen. Investors tend to be independent, so those who trade can create more giant waves.

BTC Future

Considering that Crypto takes some of its value from people’s belief in it, Markets can be shaken by skepticism or policy changes. For example, a raid by China on bitcoin mining in mid-2021 led to the collapse of Bitcoin from $65,000 in the spring to $35,000 in June. The total market capitalization of Crypto fell similarly around that time When Elon Musk announced that Tesla would no longer accept Bitcoin for payments in May 2021, Citing environmental reasons.

Many crypto investors are concerned about the governments of central crypto-trading or mining countries. Meanwhile, Crypto was rocked by a wave of hackers and security breaches. Including the $600 million hacks of the Ronin Ethereum affiliate network. These hacks have shaken consumers’ trust in cryptocurrency. It also slowed the growth of new potential buyers in this area.

Conclusion

Some experts also believe that in the recent battle of the UST, TerraUSD, one of the largest Stabilcoins, played a role in the recent collapse of Bitcoin. TerraUSD was always designed to be worth $1, But it sank below 70 cents on Monday as owners panicked and sold their tokens under a pseudo-bank. To protect the value of the UST, the Luna Foundation Guard, which defends Stabilcoin, withdrew its $1.3 billion bitcoin reserve; Bought $850 million more in Bitcoin. Analysts estimate that this move could increase significant sales pressure on Bitcoin and lower its markets. Historically negative sentiment can lead to “continued sales,” which negatively affects prices.

Whether the crypto slide will continue is unclear. Some believe that things will only worsen as more and more investors panic. However, after the price of Bitcoin fell below $30,000, its price corrected; When evangelists “acquired a decrease” or entered the market at a discounted rate. They believe that against the background of daily turbulence, Bitcoin will continue its reduced growth pattern.



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