The crypto crash is currently worrying the minds of investors. In this article, we answer the most important questions that most crypto enthusiasts are asking.
Why is the Crypto Market currently Crashing?
Many factors are currently weighing on the market. Above all, the high inflation, the radical central bank policy, and fears of a recession are currently plaguing the portfolios. But general uncertainties in the crypto markets are also causing unrest. We dive into much more detail in this article, where you can find more about the current market environment.
Should I sell everything now?
How the market will develop in the coming weeks is of course uncertain. Long-term investors should sit out these market situations. However, you should check your individual investments. Large cryptocurrencies (by market cap) are less risky than small projects. The probability that all coins will survive the crypto winter is extremely low. So: diversify and examine the technology and innovation behind the coins.
Should I Buy Cryptos now?
The current market situation is difficult to classify. When cryptos bounce back depends on tech stocks, inflation, interest rates, and many other factors. Anyone who invests in the long term can use the current courses to buy later. It could make sense to enter tranches in order to diversify the entry price and to be able to benefit from further falling prices.
How do rising interest rates affect prices?
Generally speaking, rising interest rates aren’t good for riskier assets like tech stocks or cryptocurrencies. This is because when interest rates rise, less risky investments such as bonds promise returns again. With higher interest rates, it is, therefore, less attractive to invest in risky assets. From an economic point of view, rising interest rates have another negative impact on the markets. As interest rates rise, the amount of money in the market falls. The result is an increasing value of money, which makes risky investments even less attractive.
How long will the crypto winter last?
Can’t say at the moment. Before cryptocurrencies can rise again, economic risk factors such as high inflation or fears of recession must be brought under control. After that, tech stocks and then cryptocurrencies could rise.
Why Do Cryptocurrencies Correlate With Tech Prices?
This is primarily related to cash flows. Tech and crypto investors are mostly invested in the other asset class. Both asset classes are often represented in the same funds and ETFs. When tech stocks fall, investors usually also withdraw money from other asset classes such as cryptocurrencies.
In addition, external factors such as rising interest rates or inflation tend to have the same impact on tech stocks as they do on cryptocurrencies.
Why can’t Bitcoin benefit from inflation?
Bitcoin was long considered an inflation hedge – this assumption has now vanished into thin air. Currently, Bitcoin price is too tied to tech stocks to benefit from inflation. In addition, Bitcoin was not stable enough in the past. Rising interest rates and a resulting decrease in the money supply are also causing problems for Bitcoin.
Does the Crypto Crash have an impact on the real economy?
Definitive. Not only that many investors have lost money and thus their purchasing power and the resulting demand is falling. Graphics card manufacturers such as Nvidia are also suffering from the fall in prices. Since mining is currently less profitable than it was a few months ago, graphics card prices have fallen by 35% in one month. This also has an impact on the supply chain. Companies like Coinbase have also announced a hiring freeze and layoffs.
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