Since their inception, cryptocurrencies have been volatile assets with unstable prices at any given period. This volatility has slowed down the adoption of cryptocurrencies in many countries, as its impact worries financial regulators. Financial regulators believe that adopting digital currencies with unstable values will affect their economies and citizens. This is why cryptocurrency trading in many Asian and African countries like Nigeria- Africa’s economic hub, is banned. Price volatility, despite its negatives, also has positives. One of its positives is that investors can quickly cash in on assets immediately after their prices increase. Unfortunately, the biggest loss of price volatility is, committing considerable funds to assets and losing it all in a crypto market crash. Unfortunately, the trend these days tends towards loss for investors, as asset prices continue to fall rapidly. However, the question on the lips of crypto analysts and investors is, why is the market crashing?
The Crypto Market In The Last Week
The last week has seen many crypto assets fall in price as the journey to the top becomes harder. Bitcoin remains the leading, most valuable, and most prominent cryptocurrency in the market. Unfortunately, the digital asset has failed again to have a good week. It lost more than 6% in value this week alone, as it hinges around $44,000 and $45,000. The cryptocurrency finds it challenging to cross the $50k mark and now puts itself in a difficult position to hit another all-time high (ATH) price. The digital assets’ ATH price of $68,789.3, attained last November, currently looks impossible at this rate. Crypto analysts believe the Federal Reserve’s aggression with monetary policy this year could be responsible for this recent crypto market crash.
Bitcoin is not alone in this fall, as many altcoins have traditionally followed suit. Ether has also lost about 6% in value this week, despite building a good momentum into 2022. The leading altcoin is now trading below the $3,250 mark to cap off a not-so-good week. Like Bitcoin, too, Ether reached its ATH last November but looks very far from it right now. Other Altcoins like Solana, Cardano, XRP, and Litecoin also fell in price value. Solana fell by 10%, XRP by 9%, while Cardano and Litecoin both lost 7% in price value. Meme coins also witnessed a dip in prices as Dogecoin, and Shiba Inu were down by 5% and 7%. In summary, altcoins didn’t live up to expectations this week, as investors remain optimistic about the coming weeks.
Why Is The Crypto Market Crashing?
Many reasons can be responsible for why the crypto market crash is happening, especially in the last week. However, listed below are factors that could cause a fall in crypto assets value.
#1 Investors are taking too much leverage
According to crypto analysts, more investors are taking high risks in the market. This means that, like traditional markets, investors use debts to finance the purchase of futures. How this affects the market prices can influence miners to hedge against future price drops in the coins they’re mining. Crypto analysts believe these leverages could be responsible for price volatility in the future if not controlled. One effect of this is that, as prices drop, future holders will start liquidating their positions. This could even result in a fall in prices, should it ever happen, as the crypto market doesn’t have much liquidity.
#2 Cryptocurrency Regulation
The positive impacts of cryptocurrency regulation can be very beneficial to the market. Alternatively, the negatives of such regulations can be daunting to the success of the crypto ecosystem. A typical example of a regulation that affected the market was when China banned crypto mining in its terrain. This resulted in miners seeking alternate cheaper options and thus resulting in the overall decline of the network hash rate. Hash rates are several calculations performed per second in a blockchain. It allows miners to produce new coins. When the hash rate declines, prices also decline as miners earn in cryptocurrency.
#3 Cryptocurrency correlation with the stock market
Before now, the crypto market was an indecent space devoid of interference. Unfortunately, that is not the case today, as the recent traditional market adoption now means there exists a correlation between them. A fall in stock markets could lead to investors being more cautious with investing in the crypto market. Alternatively, the prices of technology-related stocks also have effects on crypto assets. Furthermore, the impacts of such lowered risks would see the prices of crypto-asset decline causing a general crypto market crash.
#4 Security Breaches
The current high rate of security breaches in the crypto market is a cause for alarm for all, including investors. These days, Blockchain networks and protocols expose themselves to too many risks, which could worry investors. Investors would be willing to hold on to little assets or sell on time to avert the risk of losses. Since investment activity and sentiments are significant factors that control price in the market, it could be why prices of assets are falling causing a crypto market crash.
What Is The Market Situation?
While this week witnessed the dip in prices of many crypto assets, many positives still exist. For example, these assets’ average 24-hour trading volume is still stable, as optimism is high. Alternatively, crypto analysts are optimistic about Bitcoin and Ethereum, predicting a bull run in the next few weeks. Another positivity can be the annual bitcoin conference currently going on in Miami. This conference will further increase the adoption of Bitcoin globally, and expectations are that prices will move up. Like it always happens in the market, when Bitcoin goes up, others follow. The next few weeks will be important for both investors and the market, as optimism is high.
Bitcoin (BTC) Price Analysis
Bitcoin remains the leading and most valuable cryptocurrency in the crypto space. In terms of market capitalization, cryptocurrency is still the largest. However, it has been unable to outperform in the past weeks as it struggles to enter the $50k mark again. One of the factors responsible for this is the high demand for altcoins. Crypto investors are also beginning to diversify their portfolios by committing funds to various altcoins. However, Bitcoin’s market dominance is supreme, as the token’s 24hour trading volume is already nearing $24 billion.
All these metrics show that the cryptocurrency is still in high demand and remains the most popular in the market. Many crypto experts predict the cryptocurrency to hit $100k this year. According to WalletInvestor, the cryptocurrency tends towards a bullish run, and its price could reach $69033.90 by December 2022. WalletInvestor also believes the asset will be very profitable this year but will not reach $100k. Gov Capital is optimistic and believes Bitcoin will perform well this year, and the digital asset could reach $75k. Alternatively, DigitalCoinPrice is keeping their expectations simple, as they believe Bitcoin will end the year at around $60k.
Ethereum (ETH) Price Analysis
Ethereum, as a blockchain, has continued to witness massive upgrades since 2020. These upgrades will impact the network’s speed, scalability, and overall performance. The network, which provides a home to many DeFi projects, is also transitioning to a proof-of-stake consensus mechanism. According to analysts, these upgrades will positively impact its token price. Ethereum remains the leading altcoin and the second-largest cryptocurrency by market cap. Despite the recent dip away from its ATH price, the token’s performance is beyond average. Its market cap is at a whopping $386 billion, as 24hour trading volume is nearing $16 billion.
Wallet Investor is bullish on its prediction concerning the token, as it expects it to hit $7K by December 2022. They also believe it will take a long for Ethereum to near Bitcoin but sees it trading for $20k by 2026. TradingBeasts is also optimistic around ETH but doesn’t see it going beyond $5k in the next two years. On the other hand, DigitalCoinPrice is also optimistic about Ethereum and believes the token will trade for $7k by 2024. While there is so much optimism around Ethereum, most of its performance will tie to the network’s transition. This year, the protocol seeks to transition fully into Ethereum 2.0.
Ripple (XRP) Price Analysis
Despite its price fall in the last 12 months, XRP has received support from investment biggies, partnerships, and crypto companies. This further shows that there is still a lot of belief in cryptocurrency. Ripple is also about to put its lawsuit with the U.S SEC behind them amidst high fanfare. However, crypto analysts expect the token to profit when the company finally does. Crypto experts predict the token will do a 10X in 2022 as investors lurk around it to commit.
The token’s dominance is not in question, as its market cap is getting closer to $76 billion. Its 24hour trading volume is also at an ATH of $1,339,527,082.45, as CoinMarketCap ranks it as the 6th best cryptocurrency. TradingBeasts expects the token to close the year at $1.05, as it predicts a bullish run. CoinSwitch’s forecasting is the most optimistic, as the experts see an XRP of $3 by December 2022. However, WalletInvestor doesn’t see XRP doing so much this year, as they believe in its long-term performance. The experts believe that XRP will close the year at $1.3 and could hit $5 in 2025.
Solana (SOL) Price Analysis
The astronomical rise of Solana has continued to attract investors, helping them to discover the project’s high usability and functionality. The altcoin is one of those performing relatively this year and keeps investors’ hopes high. Solana is everything Ethereum 2.0 promises, as the network is 20 times faster. This is why crypto experts believe that investors in the token might be up for huge returns in 2022. According to CoinMarketCap, it is the 7th best cryptocurrency in the market. Its market cap is around $56 billion, amidst a 24hour trading volume of around $1.7 billion.
The token is still far from its ATH of $260.06 and currently trades around $109 at today’s prices. CoinPriceForecast predicts the token to move to the bullish side and end the year at around $360. The experts also believe SOL will be one of the most significant altcoins in 2032, as they predict it to hit $1000. Alternatively, the experts at CrowdWisdom believe Solana will be profitable for investors but do not see it past the $150 mark this year. WalletInvestor also seems to be optimistic regarding the future of Solans, as they see a bullish run. The expert predicts Solana could go as high as $242.6 by December 2022.
Cardano (ADA) Price Analysis
Cardano is a proof-of-stake blockchain that seeks to allow changemakers, innovators, and visionaries to global positive change. Its native token- ADA, is one of the highly-rated tokens in the crypto market. According to CoinMarketCap, ADA is the 8th best token in the crypto market. Before this week, ADA’s performance in 2022 was stable, and crypto analysts predict the status quo will remain the same. Its market cap has now crossed $46 billion, amidst an ATH 24hour trading volume of $788,799,861.91.
This is a testament to the strength of the cryptocurrency, which is popular amongst new investors. The token is still far from its ATH of $3.1 and currently trades around $1.03 at today’s prices. However, experts believe it could still do great in 2022. The experts at CoinDesk believe ADA could smash its ATH and reach $5.17 by December 2022. Experts at Investor Cube predict that ADA could also reach $3.97 this year. However. CoinQuora is the most optimistic as they believe the token could go as far as $12 this year.
Conclusion
Although the crypto market is trying to make a comeback as evidenced in recent weeks, the bears have been very dominant. This means that traders must be careful about the kind of digital assets that they purchase now. It will be nice if they carry out in-depth research before buying tokens in the market. Diversifying your tokens should also be something to consider in a crypto market crash period like this.