The crypto market is going through a bloodbath. It has crashed from its all-time high of $2.8 trillion market capitalization to $1.2 trillion, halving its global market capitalization value. Volatility is the bread and butter of the cryptocurrency market. But these days it’s in absolute shambles as Bitcoin, the largest cryptocurrency that the rest of crypto market tends to tailgate, keeps plummeting partly because of its heavy correlation to the stock market. Also, the recent explosion of Terra-Luna has factored in the recent crash.
There are currently over 19,000 cryptocurrencies and dozens of blockchain platforms in existence. Blockchain is the technology that underpins these digital currencies and platforms include Ethereum, Solana and many others. Many of the industry executives see the current state of the market as unsustainable. But for those long-embedded in the crypto industry, despite appearances, the recent market crash is neither an unexpected turn of events nor a catastrophic end. The crypto market has crashed atleast 4 times since its inception post the 2008 financial crisis.
Let us look at the stats. Bitcoin, the world’s largest cryptocurrency, is back to its January 2021 levels and has lost over half its value since it hit its peak of $68,990 in November 2021. The world’s second largest cryptocurrency by market capitalisation, Ether fell by 23% to $1,841.12. Other cryptocurrencies such as XRP have fallen by 34%, Solana is down by 38%, Cardano has tanked 35%, Stellar has fallen by 29%, Avalanche is down by 39%, Polkadot has tanked 32% and Terra USD is down by 27%.
Since the latest bull run started, seasoned crypto investors and traders have wondered when the bear market (a downward market cycle) would start. But a few things make this crash different, and arguably more painful. No previous crash has been this much affected by the macro conditions of the traditional markets, for one, and since 2020 the crypto market has also seen an explosion of hyped-up and risky projects in the decentralized finance, or DeFi, world—such as the Terra-Luna project—and an uncountable number of interchangeable NFT projects.
So, has the crash stop or bottomed out? Unfortunately, the nature of problems surrounding the crash of crypto market makes it difficult to predict the correct response to this valid question. Here’s a bitter truth though, there are higher chances of a further fall than there is of a recovery in the crypto market. The global crypto market is facing the same problems faced by the global equity market. These are: Interest rate hikes, Russia – Ukraine war, and the downfall of stable coins.
Notably, it’s difficult to predict when this crash may come to an end to reverse the bloodbath on crypto prices. It is best to avoid any investments for the time being and wait until the bottom is closer. The global financial and economic new should be closely followed to gauge the mood of the crypto and invest accordingly.