Early 2022 Trillion Dollar Crypto Crash
Although every experienced investor is wary of the inherently volatile nature of cryptocurrencies, the first days of the new year were a shocking example of the true risks of investing in such unstable currencies. Although it is difficult to pinpoint the driving factor for this phenomenon, it can be partially attributed to the current downtrend in the stock market as a whole, and the ending of the Federal Reserve's stimulus program, which was cut short from its original proposed end date. Investors are fearful of proposed interest rate raises and monetary tightening from the Federal Reserve, which is currently being debated as a temporary correction to reduce inflation. These fears resulted in major sell-offs as there is still major risk involved in investing in any cryptocurrency and there is little to no precedent on what trends can be expected.
In the first month of 2022, the tech heavy Nasdaq index has been down around 10-15% and the S&P 500 has also experienced a near 10% drop in stock price. As the cryptocurrency market is increasingly interdependent on the performance tech corporations and more traditional assets like the ones in the S&P 500, it tends to fluctuate similarly. Recently, Bitcoin, the spearhead for the global crypto economy and a global phenomenon, dropped below $35,000 a coin, which is nearly 50% below its high in November of 2021. Many experts are relatively unsure what to expect next from the crypto market and stress that commercial investors should begin to place more emphasis on the actual value behind the cryptocurrencies rather than just seeing them as risky gambles for quick payouts. While investors wait with bated breath for the Federal Reserve's decision whether or not to increase regulations on digital assets, uncertainty and confusion runs rampant in the investing community. This will prove to be a transformative period in the history of crypto, and the future for many of these coins is a complete mystery.
Links :
https://www.investopedia.com/why-is-bitcoin-price-dropping-5216985
https://www.scotsman.com/lifestyle/money/bitcoin-price-why-is-crypto-down-today-crypto-news-and-prices-of-btc-ethereum-dogecoin-solana-as-crypto-crashes-3281505
https://slate.com/business/2022/01/bitcoin-crash-crypto-ethereum-explained.html
Very interesting- sounds like you have been thinking about the state of cryptocurrencies (for a while?). In addition, the upheaval in Kazakhstan affected cryptos this month: "Events this month in Kazakhstan have answered that question with a resounding “yes.” It turns out the government of a lightly populated and tightly controlled authoritarian state can stop cryptocurrencies—simply by switching the internet off for five days." (Daily-JSTOR).
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