In this article, we will look at Why is Crypto Crashing and we will understand major reasons behind Cryptocurrency massive fall in last few days .

We will also help investors and traders know, what to do next in this crucial time when everyone wants to know “Why is Crypto Crashing”.

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In the second week of May 2022, Bitcoin fell brutally, briefly dipping below $30,000 for the first time since July 2021. Surprisingly, the world’s largest cryptocurrency is now worth less than half of what it was in the fall season. 

Along with BTC, cryptocurrencies such as Ethereum (ETH) and Binance Coin (BNB), have also seen equivalent falls, while trading volumes have also tapered off on major exchanges. India-based major crypto exchanges, such as WazirX, CoinDCX, Bitbns, and ZebPay have also seen trading volume going down. 

Cryptocurrency prices have crashed further, with many major coins losing a quarter of their value in a matter of hours.

Bitcoin tumbled below $30,000 on Wednesday – figure experts considered being a key level of support.

Why is Crypto Crashing
Source : Trading view

It fell as low as $25,500 on Thursday morning, its lowest point of 2022, and has recovered slightly to $28,000 as of Thursday afternoon.

It means Bitcoin has lost around 12 percent on its value in the last 24 hours – comparatively good news when put against other cryptocurrencies.

Ethereum has dropped by 20 percent, while the likes of XRP, Solana, Cardano, Dogecoin, Shiba Inu , and Avalanche have all lost at least 25 percent of their value.

A mixture of short- and long-term inputs, including broader financial markets and the crash of a major Stablecoin, are causing the present decline of Bitcoin and other cryptocurrencies. 

Here are the following reasons.

US Federal Reserve Pledging:

With the US Federal Reserve pledging to reduce its $9 trillion debt burden, investors and institutions have paused the market. 

Given the downtrend of equity and commodity markets across the globe, the same is faced by the crypto markets as well. The trend could be for the short term.

We are seeing many who are averaging their positions, so it may not be a bad time to get into cryptos,”

The recent downward spiral movement in crypto prices does not seem to be caused by any crypto-specific reason.

The raising of interest rate by the Federal Reserve should be looked at as the immediate reason for the crash, but broader financial and economic factors including the Russia-Ukraine War crisis, along with supply chain woes should also be factored into to assess the future outlook.

Stablecoin Factor:

With the recent fiasco over Stable coin, the market has constantly tumbled. UST – Terra USD fell more than 80 percent on Wednesday as a result of the UST (Terra USD) algorithmic Stablecoin de-pegging debacle. 

“The success of the Terra ecosystem depends on people using UST as a Stablecoin, so the LUNA token and UST are linked in a way that can’t be broken. When UST lost its dollar peg recently, it sent shockwaves through the crypto market, because it showed how weak the algorithm-backed Stablecoins are.

UST fell to as low as $0.60 yesterday during the larger liquidations caused by the macro-market volatility. This caused a major sell-off in LUNA, which led to one of the biggest price drops in LUNA’s history and effects.
In the last seven days, Bitcoin plunged 19.9 percent, according to data from Ethereum went down by 16.75 percent during the same period, while BNB fell by 5.73 percent.

In addition, the price of any asset depends on how many new investors want it. With signs of regulations in some form or another, along with the announcement of the central bank digital currency (CBDC), institutional investors are taking a wait-and-watch approach to finding out what big changes will happen because of government announcements.

Even though the retail investor interest and sentiment has continued to grow around the world, trade volume and investments have not picked up.

This is because people seem to be preparing for a market crash that is visible around the world. So, they are more likely to invest in safe assets than in high-risk, high-return asset classes like crypto.

What Should Investors Do?

In this tough time when every one wants to know “Why is Crypto Crashing”, we will help investors know what do to next.

Crypto market experts have suggested observing the market movements closely rather than jumping into impulsive buying activity.

Do not go all in now. Instead, keep averaging your investments in blue-chip cryptocurrencies.

Though the markets have fallen across the board, Bitcoin and crypto-assets, in general, have borne the maximum brunt of broader market sell-off sentiment

Bitcoin has lost close to 50 per cent of its value since its November highs. Bitcoin miners are selling off. Net miner flows are in the negative range, and exchange supply is dwindling.

Investors should look at important levels of Bitcoin.

Hope you liked our article on “Why is Crypto Crashing and What should investors do now” , do read our other article on “Best Mutual Funds to invest in During this Market Fall“.