The crypto currencies have been trading in red lately. The crypto market is in chaos. For instance, the Bitcoin has come down by 40% and Ethereum has come down by 50%. There are several reasons for the crypto asset values decreasing day by day. Let us look into all those reasons one by one.
Luna Terra crash
The down fall of the crypto markets started with the Luna Terra fiasco. The event left serious impacts on the investors and on the crypto ecosystem. Terra USD and Luna are usually referred to the sister crypto currencies. The currencies dropped by 80% recently. Many investors lost their life time savings on this event. Terra has now become worthless. Looking at this, the crypto investors are panicking.
Tera was a stable coin in the crypto market. Stable coin means it has a stable price in the crypto market. Its values do not fluctuate. Investors were shocked to see a stable coin like Tera falling to almost worthless condition. This scared them and the crypto investors started backing off.
The crypto currencies are well linked with the equity markets. If there is a down trend in stock market, the same happens in crypto markets as well. The factors affecting stock market affect the prices of crypto currencies as well. Between 2021 and 2022, the value of crypto currencies increased and decreased very similar to the stock prices. The specialty of crypto markets is that they are independent. The investors were very much attracted to the crypto market mainly because it was not affected by the trends of the stock markets. Lately this has been changing. The crypto markets are becoming sensitive to stock markets. This trend is new to the crypto investors and they are becoming more hesitant.
Increase in interests
The US federal reserve recently increased the interest rates to cool down the inflation. Increase in interest rates is recession indicators. Following this the stock market fell. The investors lost their trust on the market. They started selling off their digital assets. Because of this the crypto assets are going down in their values.
The Celsius network is a DeFi. The Decentralized Finance recently announced that it is freezing all its crypto transactions. Celsius cited “extreme market conditions” as the reason for its decision. After the shutdown, a historical sell off occurred. This plunged several crypto currencies.
The crypto markets have been under the scrutiny of governments of several countries. The world governments are trying to regulate the crypto market since a long time. In 2022, the central bank of Russia proposed to ban the use of crypto currencies in the country. Russia cited citizen wellbeing and financial stability as the reasons.
The governments are citing tax liabilities as a reason. The increasing strict norms and regulations are snatching away the independence of the crypto currencies. The attractive factor of the crypto currencies to the investors is their independence. As the crypto currencies are losing their independence, their value among the investors are going down.
I have given the top reasons of why the crypto assets are going down. Hope my article was helpful!