The value of Cryptocurrency witnessed a great fall in the year 2022. It really rattled the confidence of the investors. Millions of people trade in Crypto currency.
The crash really puts a big question on the mind of new investors. Let us discuss this in terms of data. As per the study of Statista, the value of Crypto currency rose to a record high in November 2021 ($68,000 mark). But after that, it registered a continuous flow in the price. Bitcoin or Ethereum, the values keep falling to a new low, as low as 60%.
But notwithstanding the fall, the markets are filled with optimism. The adoption of Crypto would be the highest. So do not fear and invest in digital currencies. Investing in ekrona would be great indeed! It is a government-approved Cryptocurrency. But before that, you must know the whereabouts of the Crypto currency crash.
Reasons Of Cryptocurrency Crash
Digital currency is indeed great, filled with great opportunities—millions of people invested in Cryptocurrency. But one of the faults common with the investors is the lack of developing enough knowledge and insights into it. One must know the reasons why Cryptos are crashing.
1. Inflation
The value of the dollar suffered during the period of market upheavals. During this time of economic recessions, people witnessed long-standing inflation hedges. The gold value kept soaring high. People thought that investment in Cryptocurrency could be easier because of its decentralized nature.
Being decentralized in nature, Cryptocurrency does not follow the laws of any external body but only that of the developers’ protocols. But the Cryptocurrencies somehow could not live up to the expectation of the investors as the inflation.
Due to inflation, people would be pulling out their investments or any luxury only to keep up with the flow. This trust issue can result in a crash in digital currency.
2. Regulatory Factors
Cryptocurrency was not regulated, so it motivated the business community to invest heavily in them. Now we have to understand the meaning and significance of decentralization. Cryptocurrency can not be regulated by anybody like the central banks (backed by the nation). Hence no one can see what an individual trade is and how it affects business.
But things are rapidly changing, and the questions on regulation have cropped up from corners. Driven by fears and dampened confidence, people might pull out their financial resources from these digital currencies. Hence regulations could be a reason for the Cryptocrash.
3. Volatility
Cryptocurrencies like Bitcoin and Ethereum have been touted as powerful alternatives to the stock markets. The high growth rate was the main reason. For instance, the value of Bitcoin was 1350 USD back in 2013, but in November 2021, the value reached great heights and achieved great milestones.
But thereafter, markets crashed. Now the perception of digital currencies has changed from a growth machine to a high-risk and high-reward asset. Therefore the emergence of the word risk dampens the confidence of the people, especially the new investors. This ecosystem can be detrimental to the obliteration of any financial system- be it the stock markets or the Cryptocurrency.
4. Systematic Issues: Collapse of the FTX
Any system that suffers from a lack of liquidity and utter mismanagement of funds is deemed to collapse. The same happened with that Cryptocurrency. The value of the FTT cascaded.
The money that went into one of the greatest exchanges did not actually make the purpose. One of the high officials directed the funds to buy risky investments. When the investors found a lack of liquidity, they decided to pull out, and it crashed and crumbled.
Is It The First Time?
Bitcoin recorded a previous record high of 20000 USD back in December 2017. But in the month of December again, in 2018, it experienced a crash in values of $69000. So it is not that the values were crushed for the first time. But at the same time, it gained record heights and turned investors from rags to riches! That is how it goes with Cryptocurrency.
So invest within your limits and do it for the long term. We are sure that you will have a great time getting the benefits. Finally, things can come to track. You must take the initiative and make sure to have a controlled investment.
