Over the last two days, the cryptocurrency market has been nothing short of a massacre. Bitcoin, the world's most popular cryptocurrency, plummeted to $25,000 a day ago, a significant drop from its all-time high of $69,000.
Other cryptocurrencies also suffered a drop, bringing the global cryptocurrency market worth down to as low as $1.12 trillion. Ethereum, Solana, and Cardano all plummeted by double digits, with the market taking the brunt of the damage. But what has led the bitcoin market to plummet so dramatically?
There are several explanations for this. Beginning in 2022, cryptocurrencies that had previously reached all-time highs began trading in red and have subsequently spiraled downward. The drop was mostly ascribed to a new wave of the epidemic, and just as things began to stabilize, events in the global economic environment resulted from geopolitical tensions and inflation.
"The big drop in cryptocurrency is a worldwide phenomenon." It is mostly due to macroeconomic changes such as rising inflation, the Federal Reserve raising interest rates, the Russia-Ukraine war, and so on.
It is also worth noting that the crypto markets are matching the regular financial markets in that both are experiencing a correction. It implies that the crypto markets are maturing - crypto, like traditional markets, has a bear and bull run, and we are now in a bearish period," said Nischal Shetty, co-founder, and CEO of WazirX.
"The Crypto Fear And Greed indicator were in the "Extreme Fear" zone, suggesting that investors were too concerned and were selling to limit losses." The Fed Reserve's announcement that interest rates will rise by half a percentage point sparked the gloomy attitude.
"Market investors began fearing inflation and a probable recession, causing stocks and cryptocurrency markets to plummet," said Darshan Bathija, CEO and co-founder of Vauld.
Bitcoin prices, which reached an all-time high in 2021, fell around $25,000 on Thursday, following a consistent drop over the previous week. The world's most popular cryptocurrency dropped 30% of its value on the day as market players worried over a variety of difficulties.
"Though Bitcoin fell to approximately $25,000 levels yesterday, it stabilized near $29K in the late hours of the American trading sessions." Most cryptocurrencies fell sharply in tandem with BTC "Bathija said.
"Data revealed that the pace of BTC exchange influx remained reasonably high during the previous few days." When investors decide to sell their holdings, they frequently transfer them to exchanges "He continued.
At the time of writing, Luna was number 230 on the CoinMarketCap cryptocurrency index and was priced at $0.00003872, 99.99 percent less than its fixed value of $88. The Terra blockchain was halted due to high volatility. "The Terra blockchain has officially stopped at block 7607789," terra tweeted on Thursday.
"Terra(LUNA) has had a wild week, with the token plummeting at an alarming rate." The disaster began when Terra's algorithmic-based stable coin TerraUSD(UST), which is tethered to the dollar, plummeted to nearly $0.6. As a result, Binance, one of the largest global cryptocurrency exchanges, momentarily halted the withdrawal of UST and LUNA. All of this had a cascade impact on LUNA prices, spinning them out of control. "The daily chart of LUNA has broken below the ascending channel pattern," the WazirX Trade Desk said.
"The de-pegging of the stable coin UST adds to the present market difficulties." As the de-pegging accelerated, LUNA's price fell as low as $0.009598. As a result of the sharp price decrease and severe inflation, Terraform Labs, the company behind LUNA, chose to temporarily shut down and restart the blockchain after deploying a fix. Bathija explained that this was done to "avoid governance assaults."