ZoneBitcoin EditorialSome people who entered the crypto market frenziedly (in 2021) have their heads spinning. They have entered a bull market, a masterful bull run where all cryptos (even the biggest shitcoins) reached new heights.
However, the start of the year was less euphoric, it is fair to say. In May, it was the apotheosis with stablecoins such asUSDN (Intergovernmental Panel on Climate Change) and the UST who showed their flaws. BTC reached its lowest level in a year, bouncing back to the $30,000 mark. The first crypto in terms of market capitalization is now worth only half of what it was a few months ago. Other major cryptos like ETH have also fallen drastically. The volume of transactions on exchanges itself is in free fall.
Then, to top it all off, the LUNA token which was powered by the Terra blockchain (and especially its Anchor protocol) completely crashed.
In short, the crypto market is in the red. Some see it as the return of "crypto winter". This is what we mean when we talk about "winter is coming". A sort of gimmick taken from Games of Thrones and the bear market period of 2018-2021. During this period, BTC could not exceed the 10k mark. This period of retraction was painful for people who had entered crypto in 2017, in the midst of euphoria once again. It's a bit of a period we all dread.
What is causing the markets to fall now?
There are several explanations that account for the current market. There is mainly a combination of factors. Traditional finance itself is experiencing severe declines in stock prices. Here are the most relevant factors for understanding the current crisis.
Bitcoin is linked to the classic financial market
Basically, we cannot fully understand this crisis if we do not make the link with the classic financial market. Declines in the Dow, S&P 500 and Nasdaq followed Russia's invasion of Ukraine. This has led to supply problems with essential raw materials such as gas and oil. The geopolitical disruption clearly had an impact on the global financial market. The slowdown in Chinese growth, exacerbated by covid 19, does not allow us to think of a recovery in prices in the near future.
Many crypto evangelists claim that crypto markets are independent of the financial market. They like to think that cryptos are resistant to crises and inflation... We have often preached that Bitcoin was the ultimate safe haven that would behave like theor…Actually, it may be a decoy. Although Bitcoin took off after the 2008 financial crisis, this is perhaps not what allowed it to increase in value.
The crypto market is volatile (and always will be) and attract speculators
Even if you enter a bull market, you will be subject to decline peaks. The extreme volatility of cryptos is what attracts speculators so much. With cryptos, you can earn more quickly than with other assets. Of course, you can lose just as quickly. This is what we tend to forget. In a bear market, we come to our senses.
Very often, when there is a bull market, the mainstream media relays the numbers and makes the headlines. Crypto influencers are also outbidding. The hyped headlines predicting that this or that crypto will make a X100 then keep the machine turning. This is when many small-time investors rush into the breach. Then, at the first signs of weakness, they lose their enthusiasm and withdraw their funds. They sell. Even more, they are withdrawing from the markets. It is this drop in volume which (also) contributes to the free fall of cryptos.
Concerns about regulations and various scam and security issues
The various scams hitting the crypto industry are affecting the market. It is the very foundation of trust that is then undermined. The different NFT scams, Rug Pull as well as the skepticism of major players in DeFi (like Andrew Cronje) are giving crypto bad press.
Even more, shaky regulations (like MiCA in Europe) or policy changes contribute to fueling a distressing climate. This kind of atmosphere does not encourage people to invest in cryptos.
Few concrete projects…
Ultimately, in 2021, what we saw was rather an explosion of DeFi-type protocols. Yield farming. Definitely a trendy phenomenon… Newcomers took themselves very seriously and “farmed” tokens with no future.
The flaws with stablecoins likeUST
Recently, stablecoins have started to wobble badly. However, if we can approve of the extreme volatility of cryptos, it is different for stablecoins. In the word itself, we find the word "stable". Well, not so stable then...
THEUSDN from the Waves blockchain was the first to pick up. It was the first time that we saw a stablecoin detach itself from the US dollar. It lost more than 90% of its value in 90%. Even though many say this is a FUD attack and a conspiracy, the damage has still been done. The course returned to normal but people were panicked. Shortly after, this was the case for the UST of Terra Blockchain.
There, the shock was much harder to absorb. This was psychologically hard for crypto-holders who lost more than 90% of their capital. Worse still, the Luna token crashed completely. Withdrawals on platforms like Binance were canceled. In short, a bloodbath for lunatics. The Luna Foundation Guard emptied its bitcoin reserve and even purchased an additional 850 million BTC to repair the damage.
It is too early to comment on the future of this crypto...
Final word on the crisis we are going through
No one can predict the future. We don't know if Putin will further disrupt the markets, if China will change its crypto program or if new developments will brighten up the market.
We don't know anything.
We cannot predict the markets. Only the crazy or the arrogant will tell you otherwise.
Note: No financial advice is given in this or any other article on zonebitcoin. This is information of which you are the sole judge and master. Be responsible with your investments and only invest as much as you are willing to lose.
Our affiliate links:
???? To buy cryptocurrencies (simple way):
✌️To generate interest on your cryptocurrencies:
- Public chat Youhodler (Earn up to 12% interest)
👌To secure your cryptocurrencies:
🤌 To have fun and play
- The best for Esport and Bitcoin sports betting : CloudBet
- Discover the reliable bitcoin casinos
Hello, your article is interesting but it is full of spelling mistakes, too bad.
"in the financial market", "of the US dollar", "It was psychologically tough", The extreme volatility of cryptos is even what attracts "