The crypto crash around the globe has been fuelled by several factors.
Bitcoin has halved, but this isn’t the usual ‘Bitcoin Halving’ that takes place every 4 years.
On Monday, the price of Bitcoin was less than half from its All-Time High (ATH) in November. It touched 32917.17 USDT on Binance. At the moment, it is trading at roughly 36000 USDT.
Bull and bear cycles are commonplace in financial markets. The cycles, coupled with crypto’s inherent volatility, can be heart-pounding.
In little more than 2 months from the Bitcoin ATH, the crypto market has tumbled.
The ongoing crypto market crash might have been fuelled by several factors
Russia’s Negative Stance on Crypto
After the Chinese crackdown, Russia became the third-largest hub of crypto mining. Last Thursday, the country’s central bank called for a ban on crypto assets and crypto mining citing macroeconomic and environmental implications.
Recently, Bitcoin’s hash rate hit the ATH. Still, the market collapsed because of the Fear, Uncertainty, and Doubt (FUD) created by the 3rd largest contributor to the hash rate. This may have triggered the sell-off.
Interest Rate Hike by Federal Reserve
The Federal Reserve is planning to raise the interest rates as soon as March, considering the macroeconomic conditions. A higher rate of return may push investors towards less volatile and regulated assets.
Since both the stock and crypto markets are correcting, both retail and institutional investors now have an attractive offer. It can drive money out of both the markets and tighten liquidity.
High Correlation with Stock Markets
A host of crypto-backed Exchange Traded Funds (ETF) have been established in the stock markets. It has driven up institutional crypto investment. At present, stock markets are also tumbling. So, there could be a positive correlation between both markets as institutional investors may try to liquidate their positions.
The lacklustre performance by tech companies and the imminent rise in the interest rates may also be the reasons.
Crypto whales play a significant role in pumping and dumping the market due to their large holdings. It provides them with immense power. Since they are not buying actively, the market is correcting.
Once whales resume buying the market may recover.
Financial markets are driven by several internal and external factors. They could be occasional or frequent. Crypto market is not as mature as stock market which is more than a century old. As crypto adoption rises, the market is expected to evolve into a less volatile one.
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