After days of sluggish movement with minor gains, the global crypto market crashed again at the end of June. The cryptocurrency market plunged to a new low in June 2022. The global market cap shrunk below $1 trillion to $977 billion in the middle of June 2022. In the first five months of 2022, the first and most popular cryptocurrency, Bitcoin, plummeted by over 50% from its all-time high in November 2021. It’s not just about Bitcoin, but the value of almost every cryptocurrency is now worth half or even less than their all-time highs.
Analysts believe that several factors are responsible for the major downturn in the crypto market. An immediate cause of the crypto crash might be a massive sell-off by investors amid heightened inflation fears. Here are some other prominent factors that have triggered the crypto market lately:
- Interest rate hike: The decision of the US Federal Reserve to increase interest rates to cool down inflation triggered the crypto market. Investors started selling off their crypto investments, which caused Bitcoin, Ethereum, and other cryptocurrencies to suffer losses.
- Bitcoin crash: The top cryptocurrency, Bitcoin price once again fell below $20,000. As of this writing, the BTC is down by 3.11% and was trading at $19,384 in the last 24 hours. Bitcoin hit an all-time low a few weeks back and has not recovered much yet.
- Volatility among risk assets: Experts believe that the falling risk appetite of investors led to the crypto price plunge. They are wary of the volatility of the crypto market and find it the riskiest asset. The recent enormous sell-off by investors lowered people’s confidence in cryptocurrencies. Now investors are continuing to stay away from riskier assets.
- The equity market: The crypto market is indirectly connected to the stock market. When the stock market witnessed a downturn, the crypto market also gets affected. In late 2021 and into mid-2022, the crypto and stock market simultaneously went up and down because the same factor is responsible for the fluctuation of both markets.
- Celsius Network: A decentralized finance Celsius network announced that it is freezing all crypto transactions due to extreme market conditions. Following the announcement, a massive sell-off was witnessed where all the cryptocurrencies plunged.
Some people also believe that it is a negative effect of the end of the endemic era that the crypto market is facing lately. The pandemic led people to invest their money in cryptocurrencies that they could not spend on traveling, dining, concerts, sporting events, etc. During the pandemic era, Americans invested heavily in new and emerging markets, like a cryptocurrency that fueled the crypto market. Now the world is coming back to its normal position and has started to regain those options where they could have spent or invested their money. By the beginning of 2022, all the aforementioned options were largely accessible again, and crypto had to compete with those options.