Crypto Crash 2022: What is causing the dip?

Crypto Crash 2022

There was a lot of optimism at the end of 2021 as Bitcoin achieved its all time high status of $68,000 which led many experts to believe that it will continue its bull run to 2022 but unfortunately they didn’t factor the economical factors that were going on in the world. While Bitcoin was predicted to hit somewhere in between $100,000 to $200,000, Ethereum was estimated to hit the $10,000 mark as its ecosystem began to grow.

Source: https://knowyourmeme.com/memes/events/crypto-crash-2022

Some Possible Reasons for the Dip

1. The Never Ending Chapter of the Pandemic

Throughout 2020 and 2021, the pandemic has come with different variants and although the pandemic has since recovered in 2022, the new outbreak in China may cause some worry to investors and traders out there. We know that the crypto space thrived throughout the pandemic, obviously because most people are either unemployed or working from home.

2. War Tensions

Another source of uncertainty is the war that is going on between Russia and Ukraine as it not only affects the both parties involved but also the rest of the world. People are unsure of what the future may hold and they will tend to likely steer away from Risk on assets like cryptocurrency which are well known for its returns but also its volatility.

3. Interest Rates the only solution to Inflation

When we discuss the topic of inflation, the huge covid relief provided to our bank accounts was really a source of joy in 2021 but every increase in the money supply will always come with a price in the future. As mentioned before some of them do make their way to the crypto space but when there is too much money supply chasing too few bitcoins, their price will tend to be inflated and that is exactly what happens throughout 2021.

Source: https://www.notebookcheck.net/Bitcoin-bubble-burst-threat-for-investors.282872.0.html

4. Stablecoin that was not stable

We obviously are familiar with the case with UST, an algorithmic stablecoin with its massive market cap and ecosystem that crashed so rapidly within a couple of days. This not only destroys Terra’s Luna and UST market cap but also other coins in the market. Terra is so heavily integrated with other blockchain in the crypto space, that other coins also take hit as Terra falls.

5. The Downside of Leverage

Crypto is well known for its risk from the amount of meme coins going around to the overvalued price of NFT but one of its main risks is the growing amount of leverage position going on in the market. Of course leverage is not only present in the crypto space but when you leverage something that is already a risky investment in the first place, that you are in for a ride.

6. The Absence of Proper Regulations

At the end of every market, there should be clear regulations that were meant to protect the investors during good and bad times. Unfortunately the stance for crypto has been unclear, some countries adopt it and some ban it, some allow crypto as a method of payment while some only know the trading of these assets. This lack of clarity within the regulations is what causes bad actors in the space to exploit this new maturing space.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Nagaya Technologies

Nagaya Technologies

NAGAYA (NGY) is a Gold-Backed Cryptocurrency with Subsidiary Projects. We aim to build Trust and Value through LEGALITY and TRANSPARENCY. https://nagaya.co/