Why Is Crypto Going Down? And Will It Recover?
Why is crypto going down after outperforming projections over the previous two years? This is a question that many analysts and experts are considering at the moment. Bitcoin’s volatility is causing uncertainty in the crypto market that has forced investors into tough decisions with their portfolios.
Why Is Crypto Going Down? Will the Slide Continue?
Bitcoin is the face of the cryptocurrency market. And the majority of price movement within the market is dependent on Bitcoin’s success or failure.
For example, most altcoins face volatility when Bitcoin begins to drop. Anything from negative press to government crackdowns can cause a chain reaction that leads to a crypto crash.
At the moment, Bitcoin is trading around $30,000 after hitting an all-time high of $68,789.63 in 2021. So why is crypto going down so quickly after most digital currencies were reaching new highs in recent months?
Recent government crackdowns and the resulting backlash have led to market uncertainty and volatility. And while most experts believe it’s only a matter of time before the crypto market recovers, many investors are trying to determine if now’s the time to get in or get out.
So let’s take a look at the bigger picture. Bitcoin is realizing a downward trend much like the rest of the market. On the other side of the crypto spectrum, the “meme token” Dogecoin is down more than 70% over the past two months after hitting an all-time high of $0.740796.
According to a CryptoCompare, trading volume on Coinbase, Binance, Bitstamp and Kraken also falling. These are some of the largest and most popular cryptocurrency exchanges. And in total, the crypto market lost more than $1.3 trillion in a two-week span.
As you can see, the crypto crash has led to massive losses and less trading. Investors are moving away from crypto due to volatility concerns and other factors.
Crypto Crash Breakdown
You may want to know why the crypto crash occurred in the first place – and why crypto is going down at alarming rates at the moment.
There are a variety of factors, including public influence, bad press, government pressure and crackdowns.
In May of 2021, China banned financial institutions and payment companies from providing crypto-related services. China also shut down Bitcoin miners throughout its country.
Around the same time, Elon Musk announced Tesla would no longer accept Bitcoin due to climate concerns. Musk intends to resume using Bitcoin for transactions once Bitcoin mining transitions to more sustainable energy.
More recently, the U.S. Federal Reserve has flagged digital assets for the very first time. Its semi-annual Monetary Policy Report to Congress noted that “asset prices may be vulnerable to significant declines should investor risk appetite fall, interest rates rise unexpectedly, or the recovery stall.”
And investors’ risk appetite has fallen. The recovery is stalled. Investors are less willing to take on the risk due to volatility. As a result, crypto trading is rapidly dropping and the market is taking one hit after another.
Investing in Cryptocurrencies
The crypto market is in a difficult period at the moment. But that doesn’t mean it’s time to write off cryptocurrencies for good. There’s still real investment potential in Bitcoin and many of the best altcoins, such as Ethereum, Tether and Litecoin.
Don’t overthink the current narrative surrounding cryptocurrencies. Will the market recover? Are more government sanctions on the way? Why is crypto going down after its rapid rise to start the year? Now is not the time to jeopardize your portfolio. As difficult as it may be, most analysts and experts believe you should hold on and keep a close watch on the crypto market for the time being.
About Corey Mann
Corey Mann is the Content Manager of Investment U. He has more than 10 years of experience as a journalist and content creator. Since 2012, Corey’s work has been featured in major publications such as The Virginian-Pilot, The Washington Post, CNN, MSNBC and more. When Corey isn’t focusing on Investment U, he enjoys traveling with his wife, going to Yankees games and spending time with his family.