One of the most common reasons why cryptocurrency prices are falling is government regulation. Only 28% of small businesses are accepting cryptocurrencies. Large profit taking can trigger a cascading sell-off and further exacerbate the situation. Governments can also cause a crypto crash through sweeping actions. China, for example, has been aggressively cracking down on crypto transactions. A crash can occur when a major cryptocurrency breaks through a key support level, such as 6,000 USD for Bitcoin.
While these macroeconomic factors can cause a cryptocurrency crash, they should not send investors into a panic. While many cryptos will continue to lose value, it is important to remember that markets will not move in one direction for an eternity. At some point, up-trends will run their course, and a downtrend will start. At this point, the market may push up again, if the project has a solid future. In other cases, government actions can cause panic in investors, driving the prices of cryptocurrencies even further.
Government regulations are one of the primary reasons why cryptos are crashing. Recessions can prevent people from investing in cryptocurrencies, and many are instead focusing on holding their money for a future when the economy improves. Without investment, there will be no capital circulating in the crypto market, and this will lead to a mismatch between supply and demand. The falling demand will ultimately cause crypto prices to crash. But this doesn’t mean that government regulations are the only reasons why cryptos are falling.
While cryptocurrencies are still incredibly risky, their price declines have been fueled by several factors. Rising inflation, geopolitical crises, US monetary policy shift, and the Terra scenario are all potential reasons for cryptos to crash. Rising inflation, for instance, is causing a significant drop in the stock market. Meanwhile, a recent report revealed that the correlation between cryptos and stock markets reached an all-time high in 2022.
The Bitcoin price has crashed to a new all-time low today, marking the lowest since its previous bull run in December 2020. The global market cap is currently $975 billion, and top coins have fallen 70-90 percent from their ATH. Investors are avoiding risky assets as a result of the recent news about the US inflation rate. With the global market cap now below $1 trillion, it is important to remember that Bitcoin alone is down nearly 43% this year and is trading at a fraction of its previous high of USD 69,000.