In 2021, the value of Bitcoin and altcoins like Ethereum swelled and reached unprecedented heights. But skeptics believed that the price appreciation was a result of excessive speculations. And, it seems like the doubters were right in their belief. In 2022, Bitcoin and Ethereum crash has shocked the market. Let’s look at the reasons behind the downfall and ultimate crash of Bitcoin and Ethereum.
Bitcoin and Ethereum Crash Explained
Since Terra Luna collapsed, the value of cryptocurrencies is decreasing due to unfavorable market perception. And the latest to suffer is Bitcoin which has gone below $20,000.
The last time Bitcoin was under $20K was in December 2020. However, its price rose consistently in 2021, reaching an all-time high of ~ $69,000 last year.
One of the biggest reasons for Bitcoin’s fall is the aggressive hike in interest rates by U.S. Federal Reserve.
U.S. Federal Reserve has increased the rate by 75 basis points. The hike amounts to 0.75 percentage points, the highest rise since 1994.
Experts also believe that we should blame the worsening liquidity crunch for the fall of Bitcoin and Altcoins since the turn of the year. Lack of liquidity has pushed many investors away.
Bitcoin is not the only crypto that has borne the brunt of the hike. The second most popular crypto Ethereum also felt the tremors and fell to under 1,000 for the first time since January 2021.
Ethereum’s fall is even sharper than Bitcoin’s. While Bitcoin fell 9% within 24 hours, Ethereum went down by 10%.
Currently, the cryptocurrency market is reeling due to the fall of two eminent currencies – Terra Luna and Celsius. The fallout from the breakdown of these two cryptos is $60 billion.
Despite many cryptocurrencies crashing, analysts still believe there is hope for cryptos, especially for currencies with great fundamentals like BTC and ETH.
Just like their rise was out of line, the same way the Bitcoin and Ethereum crash is an aberration rather than a norm. So, we are likely to see both Bitcoin and Ethereum making ground. However, this time, the price rise might not be as rapid as we saw in 2022.