Why is the Crypto Market Crashing ?
It has been a rough few weeks for crypto investors, the months long decline of cryptos like BTC and ETH has been slipping quickly in recent days, with prices falling to their six month lows, wiping out billions of dollars from the market.
Bitcoin, the largest crypto, lost more than 12% on Friday and fell below $36,000 to its lowest level since July 2021. Since touching its peak in November last year, it has lost almost over 45% of its value. Other digital assets also faced the similar kind of dip, if not more, with Ethereum and meme coins suffered similar drawdowns.
What caused the latest Slump ?
The volatility with the price continues apace with new economic uncertainty over the Omicron Covid-19 variant, new statements from Federal Reserve Chairman on the health of the economy.
Despite slipping back significantly from its peak, many experts still expect BTC to cross $100,000 at some point in the future. Soon after BTC touched its latest all time high, ETH also touched the peak when its price went over $4,800.
Crypto oriented stocks also saw dip in their price on Friday, with Coinbase losing nearly 16% and falling to its lowest level after going public (as per Bloomberg). MicroStrategy tumbled 18% while the SEC said the company can’t strip out BTC’s big swings from the unofficial accounting measures it touts to investors.
Proposal to ban Crypto in Russia : (source : CNBCTV18)
The main cause behind the latest rout is believed to be the proposal by the Russian Central Bank to ban cryptocurrency. The Central Bank of Russia yesterday stated it was proposing to the government that all use and mining of cryptos on Russian territory should be banned.
This move would be taken due to the risks that cryptocurrency poses to financial stability, the sovereignty of monetary policy as well as the financial safety of its citizens, said the bank. The legal status of cryptocurrency has shifted quite a bit in the country in the past.
While Russia has been resistant to cryptocurrencies for years, citing threats of terror financing, it had still granted cryptocurrencies legal status in 2020. However, the use of the tokens as payments was banned.
US Federal Reserve’s hawkish stance :
Meanwhile, the Joe Biden administration is preparing to release an initial nationwide strategy for cryptos as soon as next month and federal agencies with assessing the opportunities and risks that they pose. Some of these dips in 2021 have been caused by multiple factors, from craze about the low quality meme coins, to negative remarks from Elon, to Chinas crack down on cryptos. The mix of these factors have caused huge sell-offs in 2021.
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