Possible Causes of the Recent Crypto Market Crash

Over the weekend, crypto-asset prices resumed their downward spirals, hitting their lowest levels of the year. The total value of all cryptocurrencies on the market has dropped to its lowest level in 10 months. Over the weekend, another $130 billion left the market, bringing the total drop to $1.62 trillion.

The fact that the Federal Reserve hiked interest rates by a half percentage point last week, prompting a stock market decline, may have been a contributing factor. Then, in the last week, the cryptocurrency markets followed suit and lost almost 10 percent, or $200 billion.

According to Edward Moya, senior market analyst at OANDA, crypto markets are known to correlate with indices such as the Nasdaq. He claimed that while the tech-focused index is down 21 percent this year, Bitcoin is also down 22 percent, he claimed, supporting this claim.

A decline in institutional interest may also be a contributing factor to recent adverse price movements. In 2021, institutional investments were quite positive, but this trend did not continue into 2022.

In 2021, Tesla and MicroStrategy entered the cryptocurrency market, increasing momentum and purchasing pressure. In contrast, institutional outflows lasted for around four weeks in 2022, resulting in a far more muted market.

After the initial shock of the COVID-19 outbreak has dissipated, investors seem to be responding to what is occurring in the larger economy, since there appears to be a lot more trust in conventional assets.

In conclusion, crypto markets are cyclical, meaning that what rises must ultimately fall. Since Bitcoin’s inception, there have been four separate bull markets, but if history repeats itself, the market may stay negative for the remainder of 2018 and into 2023.

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