The performance of cryptocurrencies isn’t faring well as of late, with top digital assets Bitcoin and Ethereum dropping in value by around 40% since mid-November–where Bitcoin reached an all-time high of $69,000. As of January 21, the price of Bitcoin sank to around $36,900, posing an alarm to investors who are HODL and hoping that the market will recover.
What caused the crypto market to go bear? Cointelegraph is looking at three possible theories, with one of them being the US Fed expecting to raise interest rates this year by threefold, pointing the blame to the Omicron surge as the cause for the new interest rates. In this note, a Reddit post suggests that the volatility of the crypto market–specifically the big drop in value for Bitcoin, may be caused by people gambling on crypto and investing their assets into it.
It’s worth noting that it’s not only the crypto market that is suffering from drops: even major markets like NASDAQ and S&P 500 are also suffering from losses as well–showing that there is an increasing correlation between the two.
While there are US politicians who are working to limit the Fed’s scope with digital currencies, it is still not helping Bitcoin to recover in value.
Outside of the US, Cointelegraph also thinks that the massive drop in Bitcoin’s value may be because of Russia’s plan to impose a total ban on crypto mining and trading, with their Central Bank comparing Bitcoin to a Pyramid Scheme.
“Potential financial stability risks associated with cryptocurrencies are much higher for emerging markets, including in Russia,” their Central Bank said.
While this drop on most cryptocurrencies may be considered as the first major crash for 2022–with a selling spree happening in the crypto market–veteran traders remain confident that the market will recover eventually later in the year.