Crypto prices have been falling for weeks. Today, prices dropped again significantly. Bitcoin price is currently below $20,000 per coin. Ethereum has even fallen below 1,000 euros. Due to the losses of the two biggest cryptos, most altcoins also lost massively in value. Cardano is currently below 50 dollar cents, Solana fell by almost 20% to below 30 dollars at times.
The massive crash over the past few days has caused the overall crypto industry market cap to fall below the $1 trillion mark. But what do the losses mean for the overall market?
Crypto Crash Reasons
The main reason for the losses is probably the persistently high inflation, which is at a consistently high level in most industrialized countries. In addition to a loss of purchasing power, such high inflation causes economic problems, such as a lack of consumer demand.
In addition, fighting inflation in the capital market is feared. The US Federal Reserve is currently fighting high inflation with a radical interest rate policy, which is leading to less money on the market and making risky investments such as cryptocurrencies less attractive.
BIG Concerns in the Crypto market
The turmoil in the market is currently causing more and more problems for some crypto projects and companies. The crypto lending company Celsius announced that it would pause all transactions. The reason is the “extreme market conditions”.Crash situations such as the failure of the stable coin Luna, which had to lose 99% of its value, are currently causing a massive loss of trust in the crypto market.Meanwhile, the falling prices are causing further problems. Mining activities become much less attractive when crypto prices are low. Due to the currently low prices (with high energy costs), mining is no longer worthwhile in many parts of the world.
The consequences of the crisis
The consequences of the massive price losses are existential risks for the crypto industry. Above all, however, is the loss of trust that cryptocurrencies are currently suffering. Due to the enormously falling prices, the trust of many in the ideas, innovations and projects that are currently taking place on the blockchain is disappearing. The consequences are large-scale capital deductions. The currencies themselves are suffering as a result, but not least also listed companies. Coinbase has already announced a hiring freeze to get through the crypto winter.
How will the crash end?
Currently, a turnaround in the crypto market only seems to be accompanied by falling inflation and stable economic data. As a result, tech stocks would rise first. Cryptocurrencies would likely lag behind rising tech stock prices. The reason for this is the flow of money. Tech and crypto investors are usually similarly positioned and usually invest in both industries. Since stocks are initially likely to promise more returns in a recovery phase, the cash flows would probably first flow into the “safer” investment before the crypto prices would also rise significantly again.
Are Cryptocurrencies dead?
Even if the prices of almost all cryptocurrencies are clearly underwater in 2022, this does not mean the end of the crypto world. Progress and innovation will continue to develop and can only be restricted by strict regulators. Cryptocurrencies, like company shares, will survive the crash and thrive again after the “crypto winter”. However, it is also clear that not every coin will survive. In particular, scam coins and fun currencies could not survive the crypto winter. However, such readings are important in order to be able to form a serious and profitable crypto market in the future.