Is cryptocurrency crashing today
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The crypto crash of has seen major digital assets give back the gains they achieved during their historic bull run. One major cause is the tightening monetary supply amid rising interest rates. While these policy changes aim to curb rising inflation, one side effect is the devaluing of risky assets, like cryptocurrency.
The decline in crypto prices is putting stress on both institutions and individual investors who made investments near the top of the market. Though the factors driving each crypto crash are different, it can be helpful to remember a few established investing principles, like choosing how much of your overall portfolio should be invested in crypto.
Crypto's price moves can be affected by interest rates, inflation and other macroeconomic factors that can affect how confident people feel investing their money in risky alternative assets. With interest rates rising, savings accounts become more attractive, and some people may be more comfortable putting their money where they can get predictable returns.
And when prices fall rapidly as they have in the spring of , that can compound the pressure on the market by forcing some investors to free up cash so they can meet other obligations. Another factor that can drive investor pessimism and may lead to crypto crashing is government actions by regulators around the world. As interest in cryptocurrency has grown, public officials are reckoning with what the technology might mean for monetary policy, security and the environment.
China has been particularly aggressive. On Sept. Gazette: What set off the cryptocurrency slide? A lot of tech firms make big investments in growth upfront, and then the payoff is long-term in the future. At the same time, a lot of the basic technology investment and entrepreneurship in crypto is still going on.
We saw this with previous crypto cycles as well. Bitcoin, the oldest, most established cryptocurrency, has fallen over 70 percent in value during that period. What changed? Kominers: There was still uncertainty. We were just in much more of a financial boom and a crypto boom, specifically. Even in that period, the market prices of various cryptocurrencies were moving up and down—massive swings—30 percent swings within a week, sometimes.
I advise a bunch of entrepreneurs and the feeling of many at the time was that it was very difficult to be building in that environment because things were changing so rapidly, and there was so much attention and pressure from the boom cycle. That means there has been lost value—there have been losses for the entrepreneurs; there are losses for the investors.
And that percolates back to retail investors, as well. But at the same time, the entrepreneurs who are still out there swinging are getting a lot done and creating a lot of value. And remember: not all crypto products are purely financial. For example, many are more consumer-facing products like systems for coordinating group decisions or managing event tickets.
The long-run view is that there is real fundamental technological value here, and so what really matters for the market is whether we can realize that value through entrepreneurship and supporting regulation. And I think the current environment is one in which we have a lot of potential to do that.
Nasdaq bets big on digital assets despite crypto turmoil Nasdaq Digital Assets, will offer custody services for cryptocurrencies, including bitcoin and ethereum, potentially pitting it against firms such as Coinbase, Fidelity Digital Assets and Winkelvoss twin-owned Gemini that offer similar products.
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The boom triggered investment haste, as many people perceived it as a new opportunity to make money. However, the boom equally caused notable problems such as frenzy buying, fraud, and cases of hacking, which collectively contributed to the crypto market crash.
In , the market corrected , and crypto investing seemed to be at its peak. Bitcoin commands the largest share of the crypto market, and a decline in its price is more likely to cause the entire cryptocurrency market to lose value. Altcoins such as Terra LUNA and some stablecoins equally experienced massive price declines, which affected their price peg to the US dollar.
The crypto crash occurred due to multiple reasons, including international geopolitics, the stock market, and the US economy. Besides, the world is adjusting from the pandemic that saw many people invest in the crypto market and its allied businesses. As the crypto market continues to lose value, crypto-affiliated businesses such as Voyager, 3ac Celsius, and Three Arrows Capital went insolvent, as people lost faith in the market.
In the meantime, the values of cryptos kept plummeting, with fewer people investing in crypto trading. A combination of these headwinds is likely to have caused the crypto crash in , broken down as follows: The presence of inflation Many people may have expected cryptocurrencies to remain stable and act as a hedge against inflation, just like gold and other precious metals had done so in the past. According to the data published by the U. Labor Department, the annual US inflation rate has been moving between 8.
The rising inflation affected the prices of everything from cars and plane tickets to groceries and gasoline. This might have led people to pull their money out of some investments, including cryptocurrencies. This trend could be one of the major contributors to the months-long surge witnessed in the crypto market up to late The volatility of speculative assets Many holders of cryptocurrencies such as Bitcoin and Ethereum see them as alternative investing options to investing in the stock market.
This emerging trend could point to people beginning to see cryptocurrencies as high-risk, high-reward assets that somehow may not be suitable investments, especially in times of instability and upheaval caused by global geopolitics and wars. The Russia-Ukraine war The ongoing war between Russia and Ukraine is likely to have affected the price of cryptocurrencies negatively.
Speculative assets such as cryptocurrencies are often more vulnerable, especially if something happens that violently shakes the global economy. With this in mind, many investors could be weighing the situation in Eastern Europe and the world at large before they can put their money in such avenues.
Understanding a bear market A bear market can be seen as an eye-opener by some investors because it flushes out malinvestment across different asset classes. For instance, during the dot-com crash witnessed in the s, several internet-based companies closed businesses. Similarly, during the cryptocurrency boom in , many tokens were launched and traded on various crypto exchanges , only to realize that many of such projects lacked utility and long-term plans for sustainability.
The crypto market crash caused many such unprofitable projects to close business while legitimate projects and businesses carried through the storm. A similar situation was replicated in , as projects that could not withstand the storm, such as the ones mentioned above had to whittle down.
When choosing investments, investors should research the projects thoroughly and get to know their objectives, including: What problems are they trying to solve, and how? Who else is competing in the space? What work has already been done?
Has it lived through a bear market and survived? What can you learn about the people involved? In essence, investing in speculative assets should be informed by the fundamentals and long-term conviction of the projects instead of emotions, mainstream, or social media hype. However, there are potential risks of buying crypto in a bear market. In such times, many people would take unmeasured risks. Oftentimes, newcomers enter the market at such times out of FOMO, which may drive them to invest in projects that may not be sustainable.
Importantly, before investing in a bear market, people need to ask themselves what amount of money they can actually afford to lose, as any investment comes with inherent risk. On the other hand, bear markets can provide potential opportunities for investors who target the long run, as most assets trade at a fraction of their actual values. How to invest during a recession While investors can lose money in a bear market, the situation presents a unique opportunity to take advantage of unrealized losses.
This practice can be profitable if and when the prices come back to their previous or new highs. Using indicators to identify the best entry point This method mainly applies to traders and investors with a basic or advanced understanding of technical analysis.
They can predict the price of an asset, and analyze indicators and chart patterns to help them determine when an asset has reached a bottom. While no indicator is completely foolproof, they can provide a strong signal when to buy a dip, especially when using the Relative Strength Index RSI indicator. The RSI is a momentum oscillator that comprises a channel and a line that moves in and out of it. Following the collapse of a major pair of tokens, some cryptocurrency lenders froze customer withdrawals, and several crypto firms have cut jobs.
But as the value of highly volatile crypto currencies plummeted -- bitcoin alone has shed over 60 percent since November -- the firm faced mounting troubles until it froze withdrawals in mid-June. Experts say perhaps not! The sharp fall has kept the crypto experts, analysts and investors on tenterhooks, baffled over the thought that Gari is India's own Terra LUNA in the making.
While a few experts agreed to the point hesitatingly, others did not. Seeing the sharp drop in the prices of Solana based tokens, holders started to panic and sold off their tokens, adding to the downward trend, said Edul Patel, Co-Founder CEO, Mudrex.
Extreme volatility in the crypto markets, including so-called stablecoins, resulted in "fire sales" and amplified price falls, the bank said in its latest financial stability report.
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