crypto crash

What Caused the Crypto Crash?

VWB Blog 2 years ago 2

Did you know that cryptocurrencies existed before Bitcoin? In fact, the first cryptocurrency was called eCash and it came out in 1990. Since this past spring crypto has been dealing with a bit of a crash and has not been able to recover.

We have put together this short guide to share where this crypto crash came from and where we can see crypto going from here.

Luna Terra Fiasco

One of the events that started the Bitcoin crash was the crash Luna-Terra experienced. This caused some investors to lose their entire life savings because before the crash the market capitalization of Terra coin was over $18 billion. This was a stablecoin that was created to help investors get in and out of fiat easily without having to deal with third parties such as the bank.

Unfortunately, Luna Terra lost almost its entire value, and they said they were planning on selling their entire Bitcoin reserves to bring the value back to $1, but they ended up not following through with their plan. This caused more than $40 billion to be wiped out of the crypto market bringing down the value of Bitcoin as well.

Increased Interest Rates

Because of rising inflation, the United States Federal Reserve decided to increase interest rates. When interest rates hike, this is an indicator of a leading recession. Once this news came out about interest rates, the crypto market started to see a huge crash.

At this point many investors lost trust, so they started to sell off their crypto assets, causing the market to crash.

Regulatory Challenges

With the governments around the entire world trying to regulate cryptos, it has caused a rollercoaster ride for the entire crypto market. One example, is Russia which proposed banning the mining of cryptos. If this occurs, it will cause threats to financial stability.

All the regulatory challenges have made it difficult for investors to decide if they want to invest or not. You can find out more about taking out loans with crypto.

Equity Market

Believe it or not, the cryptocurrency market is linked with the equity market. Whenever the stock market witnesses a downward trend, the crypto market tends to replicate the same trend. The reason is that many of the same factors that affect the stock market affect crypto prices as well.

As we see tech stocks such as Apple, Amazon, and Tesla dip down in value, crashing Bitcoin is common. Studies have shown that Bitcoin’s price fluctuation tends to mirror Nasdaq’s.

Feeling Like a Crypto Crash Pro?

Now that you have learned the answer to the question “why did crypto crash?” you can make an informed decision whether you want to invest some of your hard-earned money on crypto.

Did this article help you out? We have more where this came from, check out the rest of our finance section for our latest.

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