There has been horrifying news everywhere you turn on the internet in recent days. This bad news has been from climate change, politics, war, economy, to the current cryptocurrency crash. This is the latest bearish streak in the virtual currency world. Now, in the resale market are high-end equipment dumped by miners. Every week is greeted by more horrifying news: prices are falling as more graphic cards are dumped!
Some crypto pundits are asserting that this is the worse beating so far the crypto world is facing. Almost $1 trillion has been lost so far in a very short timeframe. Bitcoin and Ethereum, the top coins, have shed about 35% and 43% of their value so far in the wake of events. This begs the question; is there still a future for the asset class? Below are the top 3 reasons behind the ongoing crypto market crash.
Top 3 Reasons behind the crash
Luna Terra, a stablecoin, experienced a stunning fall earlier this year which sent the whole crypto market toppling. How did it happen? Just last year, Terra Luna gained a whopping 17000% from $0.65 in value to reach $116 earlier this year. This analysis means if you had invested, say, $1,000 at the time, your investment would be almost $200 thousand.
However, the tables turned when the stablecoin came under a serious and complicated financial attack resulting in a sharp drop in the value of the coin from $1 to 35¢ in days (1:1 depegging). The bad news? $45 billion was lost by UST investors.
As though that was not bad news enough, the assets of many UST and LUNA holders were locked up on the Anchor Protocol, making them unable to redraw their funds during that period. Their UST or LUNA literally went down to almost $0 in value. If this is not depressing enough, I don’t know what it is.
This event sent shocking waves to the entire crypto market, causing investors to pull out their funds or money from crypto assets.
Because of the inflation in the US and Government’s frantic efforts to salvage the situation, the rate of interest was increased by the US Federal Reserve. This is the biggest hike in the last two decades. This birthed the downfall experienced by the stock and crypto market. They fell steeply. This led to investors impulsively selling off their digital assets.
Coupled with the fact that decentralized finance, Celsius Network, started freezing all crypto transactions in a bid to stabilize liquidity and protect assets. This led to a huge downfall of the crypto market.
The global crypto world has been subjected to different Government laws across the globe. Some are in favor of it while others are not. These tough regulations have made it pretty difficult for investors to make key decisions in investing in crypto. For example, India is well underway in proposing a bill to ban all private cryptocurrencies in the country. This means all investors and miners will be penalized.
Currently, there’s a 30 percent tax levy on crypto investors. Every crypto intra-traders is also subjected to 1 percent TDS. We don’t know if India may legalize crypto, but all we know is that it’s not regulated for now.
Russia is another classic example of countries whose central bank is proposing a ban on mining and the use of all cryptocurrencies in the country. Why? It’s assumed that virtual currencies are becoming a financial threat to the economy and even to citizens’ financial stability.
Even in other countries where the adoption of crypto is the new normal, regulators in the country are trying so hard to clamp down on all crypto transactions. Countries such as Nigeria and Kenya experience this. Others who have partially banned all crypto transactions include Iran, Columbia, Egypt, Bolivia, and others.
Final Thoughts
Some crypto pundits predict that it will only get worse before it gets better as we continue to experience more and more decline in the financial value of all cryptocurrencies. What are your thoughts?
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