Why is Bitcoin crashing? Answers to your questions about the crypto crash.


The past few days have been difficult for cryptocurrency investors, although they should get used to it by now. The month-long decline of cryptocurrencies like Bitcoin and Ethereum has accelerated in recent days, with prices now hitting six-month lows, wiping out billions of dollars in value. Here’s what you need to know about the cryptocurrency price crash.

How bad is that?

Cryptocurrency prices have been falling since November, and investors are now embarking on a selling frenzy that is driving prices down even further. Since Sunday, around $130 billion has disappeared from the cryptocurrency market. Bitcoin was around $35,000 on Monday morning, down around 50% from November’s high of $69,000, while Ether was around $2,400, also down around 50% from a high of $4,670. (Both cryptocurrencies rebounded a bit at the end of the day.) The Shiba Inu coin, meanwhile, was down 78%.

OK, that sounds bad. Can you show me how much in a chart?

Sure.

bitcoin price
google

Why does this happen?

It’s hard to pinpoint exactly what’s behind any cryptocurrency drop, but analysts have floated a number of theories. Bitcoin’s fall may be just one piece of a bigger story, as the stock market has also been trending lower since the start of the year and just had its worst week since March 2020. , likely in reaction to moves by the Federal Reserve to raise interest rates and end its stimulus program sooner than it originally planned. (Stimulus money flowing into people’s pockets has also helped fuel the cryptocurrency boom we’ve seen during the pandemic.) In tougher markets, investors tend to sell off their assets riskier, cryptocurrency being one of them. As more traditional investors have become involved in cryptocurrency over the past couple of years, stock markets and Bitcoin have become increasingly linked. The specter of upcoming regulation could also spook investors, as the Biden administration is expected to release a federal cryptocurrency strategy next month.

OK, but small investors hold on, right? And if it was only the Norman ship of Wall Street?

In fact, The Wall Street Journal reports that retail investors in particular appear to be driving the cryptocurrency price decline, with the volume of small transfers declining by more than 40% between the first and fourth quarters. from last year. MarketWatch also notes that new and short-term holders, some of whom just bought at the top, are primarily responsible for the sell-off.

Are famous crypto boosters freaking out?

Certainly not out loud. Nayib Bukele, the president of El Salvador who made the country the first in the world to adopt Bitcoin as legal tender, announcement Friday that his government had purchased another 410 bitcoins since prices are low. Elon Musk, arguably the most powerful crypto booster, tweeted a meme from the movie Interstellar Wednesday to joke about cryptocurrency volatility.

Peter Brandt, a commodities trader and prominent Bitcoin analyst, suggested holding on.

Nicholas Merten, CEO of financial platform Digifox and popular cryptocurrency YouTuber, hinted that there will soon be a good opportunity to buy more Bitcoin.

Obviously, it would be in the interest of anyone who owns cryptocurrency to encourage their subscribers to HODL.

Didn’t New York’s New Mayor Just Get His First Bitcoin Paychecks?

Yes, Mayor Eric Adams announced in November that he would convert his first three paychecks to Bitcoin and Ethereum using the Coinbase cryptocurrency trading platform. His first paycheck for $5,900 arrived on Friday. While it’s unclear how much money he ended up with since he didn’t publicly disclose the ratio of Bitcoin to Ethereum, it’s certainly below what we would have gotten if he did. had kept in dollars. Adams wasn’t in tune with the price drop when asked by CNN’s Dana Bash how much money he lost and if he had any regrets on Sunday.

Does this undermine the larger crypto project at all? We are literally talking about wiping out half the value of Bitcoin.

You might say this is another example of the type of volatility that makes it extremely difficult to use bitcoin as an overnight currency, but the actual price drop it is currently experiencing is not so unusual considering what we’ve seen of this and other cryptocurrencies in the past. As the Journal points out, it is the eighth time since its launch in 2009, the price of Bitcoin has fallen by more than 50%. The last time Bitcoin saw such a big drop was in July, when it quickly fell below $30,000, before rallying 10% a week later. It remains to be seen if prices go down this time around – or how much they will go back up – but so far it looks like another rapid descent on the Bitcoin rollercoaster.

Can we talk about that Matt Damon ad for a second? Maybe it’s a problem that crypto is marketed so that these barely regulated coins are aimed at ordinary consumers who may not understand their inherent risk?

While this explainer does not offer investment advice, he feels compelled to point out that Crypto.com, the exchange behind the Damon ad, is about to run another ad promoting crypto- currency during the Super Bowl.

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