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Bitcoin has plunged again, taking down major cryptocurrencies along with it
The Bitcoin price has dropped below US$20,000, marking the lowest price since December 2020, which was followed by the Federal Reserve’s decision to raise interest rates to about 0.75%. The declining BTC price has caused investors to pull back from the riskier assets to more centralized and traditional forms of assets. Bitcoin has plummeted by over 50% this year, whereas, its biggest rival cryptocurrency Ethereum has dived down by almost 73% this year. The digital asset domain has been experiencing extreme volatility for the past several weeks, which has subdued the prominence of major crypto exchanges in the financial and economic landscapes. Crypto companies are laying off thousands of employees as investors sell off major digital assets like Bitcoin.
Bitcoin’s present market movements reflect that the crypto market is quite closely following the global stock market. Similar factors continue to impact stocks and other assets. Consumer prices are also on the rise and are surging quite dramatically. The Fed has increased interest rates to bring down inflation as soon as possible. Higher interest rates are enhancing borrowing costs for people and companies, which are increasingly raising concerns about a global economic recession. Over the past couple of years, BTC has risen exponentially and has gained a reputation of becoming a profitable hedge against inflation. Now, as BTC itself is acting out of character, investors are flocking to traditional investment assets, instead of choosing digital assets.
Why has Bitcoin plummeted below US$20k?
The sharp fall in cryptocurrencies is getting investing companies into all kinds of trouble. The market’s fall was marked by the declining value of Bitcoin. Now experts believe, Bitcoin’s value fell due to various reasons, starting with the Russia-Ukraine war, inflation hitting a fresh 40-year high and the slumping stock market. And since the crypto market has been increasing following the stock market, making things worse, almost all economic, political, and financial factors are now influencing the crypto market. This phenomenon has completely ruled out the very nature of cryptocurrencies, which is decentralization, meaning the crypto market was supposed to remain safe from any sort of external influences. The current financial market conditions have spooked investors, leading to a major sell-off season.
Bitcoin still entered the year 2022 on a positive note. But due to several factors, its price has significantly declined. But despite falling back significantly from its last all-time highs, several BTC fanatics continue to believe that the crypto will reach US$100,000 st some time. Besides Bitcoin, Ethereum has also demonstrated dramatic poor performances over the past weeks. News and updates about the Ethereum Merge upgrade have also failed to create a buzz in the community. According to coinmarketcap, the Ethereum price dived below US$900, but its prices have recovered since then, as so have the prices of several other altcoin prices.
Experts have suggested investors not buy the dip right now because the price of Bitcoin is at its most volatile stage right now. Anti-crypto individuals are mocking the crypto as they predict that it might fall as low as US$0, totally disintegrating into oblivion. A fundamental change is long overdue which might initially enhance the value of the cryptocurrencies. For those who wish to invest in crypto for long-term hold and buy practices, price swings are quite common and are sure to be expected in the crypto market. But if you are someone who is skeptical about the future of digital assets, then following the investment trends would not be the right way to go.
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