Falling prices stoke a winter of discontent for the crypto market

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Falling prices stoke a winter of discontent for the crypto market

 Falling prices stoke a winter of discontent for the crypto market
Image source: Wit Olszewski ,shutterstock

Highlights

  • The global cryptocurrency market fell by more than 10% in the past 24 hours to Friday morning.
  • On Nov 10 last year, Bitcoin had climbed to an all-time high of US$68,789.63.
  • Bitcoin’s surge coincided with the market’s record valuation, climbing nearly US$3 trillion.

The crypto market has been seeing a significant meltdown in recent weeks. All major digital assets have pulled back, giving the global crypto market a major jolt. In the last 24 hours to Friday morning, the crypto market fell more than 10% to US$1.78, according to CoinMarketCap.

Why is the market falling so sharply?

 One of the reasons, analysts believe, is the concern over interest rate hikes in the US. The Federal Reserve is considering increasing the interest rates to calm down high inflation.

Also Read: Nasdaq logged 66th correction this week since its inception in 1971

Investors could be worried that an interest rate hike would trim their profits. The Omicron factor could also be playing a spoilsport. Markets are wary of the rising covid cases.  

In addition, the Treasury bond yields have risen to record highs in recent days, leaving the markets in jittery, whose impact could also be felt in the cryptocurrency trade. Investors have apparently distanced themselves from risky investments, including cryptos and equities.

Another reason for the lack of enthusiasm in the market could be the recent unfavorable observation of the Russian central bank about the use and mining of cryptocurrencies.

This week, the bank said it had proposed a ban on such activities that could harm Russia's financial stability. It said it would collaborate with regulators to stop their use. In 2020, the government gave cryptocurrency legal status but banned its use for payments.

However, currently, there is no law banning crypto mining in the country.

China, another major global power, have also banned the cryptocurrency trade.

Last year, it carried out a string of raids to expose the illegal trade. Observers believe many Chinese crypto operators have shifted their base to neighboring countries to run the operations.

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Why is the crypto market falling?

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Market Performance

The cryptocurrency market rose to record levels last year, helped by rising prices of Bitcoin and other leading digital assets. Bitcoin hit an all-time high of US$68,789.63 on Nov 10. Bitcoin’s surge coincided with the crypto market’s record valuation, climbing nearly US$3 trillion.

However, despite significant gains, the market’s characteristic volatility has kept investors on their toes. Still, analysts believe the market will heat up again, probably in the second half, when the current uncertainties would be more apparent.

Also Read: Russia to ban mining and use of cryptocurrency

Finally, these assets have survived the periodic storms in the market. Many pundits see strong growth potential. They believe their growing popularity would further boost profitability.

The current downslide is also an opportunity for investors to capitalize on the low prices because they typically bounce back strong after each fall. Still, investors should carefully evaluate the assets and the broader market before investing in digital coins.

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