The crypto sector hit a high of about $ 3 trillion in total wealth last November, but has now plummeted to less than $ 1 trillion. Prices of cryptocurrencies, including Bitcoin, can fluctuate due to changes in supply and demand, and speculation about price changes.
Why does the cipher fall?
Bitcoin was trading at $ 64,000 per coin in November, but now investors can get cryptocurrencies for about $ 21,000 (£ 17,000).
And the current crisis is similar to the 2008 financial crisis, which felt lasting consequences around the world.
Part of the problem in 2008 was that lenders were unable to respond to margin claims. The broker has requested that the investor deposit cash or securities to cover the potential loss.
Read more: Cryptocurrency Crash: Bitcoin may plummet to $ 10,000
The equivalent of cryptography happened when companies announced difficulties after the prices of digital assets fell.
Celsius Network, Babel Finance and Three Arrows Capital shared news of their issue. This created a crisis of lack of resources and high demand.
This isn’t the first time cryptocurrencies have fallen sharply, but experts say there’s a reason to worry this time around.
In an interview, Jason Urban, co-head of the transaction at Galaxy Digital Holdings Ltd., explained that this decline was more about crypto success than anything else.
The poorly performing crypto market is called crypto winter and is similar to the bear market in the stock market, where investment prices have fallen over the long term.
John Griffin, a professor of finance at the University of Texas at Austin, told Bloomberg that interest rates and lack of confidence in leveraged platforms such as apps that allow small amounts of capital to access larger markets are part of the problem. rice field.
He states: “Because of rising interest rates and lack of confidence in leveraged platforms, this de-leveraging cycle has the effect of clearing much faster than these prices rise.”
The crypto market is now slightly above the $ 830 billion value of 2018 before the start of last winter.
But now the range of investors is much broader, appealing to individual investors as well as hedge funds.
In short, as the market becomes more complex, it becomes increasingly difficult to predict the future of cryptography.
The only thing that is certain is cryptocurrencies-like much of the world’s finance today-that’s going through a dark phase.