Over the last two weeks, the cryptocurrency market has been in freefall. Bitcoin, the world’s first digital currency, plunged below $30,000 twice in a week, reaching its lowest level in 16 months. Other blue-chip cryptos also declined, with losses ranging from 30% to 90%.
Bitcoin, the largest cryptocurrency by total market value, attempted to recover and rose 13.28% to $30,360, up from a 16-month low of around $25,400 on Thursday. It is still well below week-ago levels of around $40,000, and unless weekend trade improves, Bitcoin will suffer a record seventh weekly loss.
Following the Fed’s rate hike last week, the crypto market has been experiencing considerable turmoil. Investors are concerned about the crash, which has pushed all cryptos into a tailspin.
The wide-ranging drop has triggered heavy selling in the cryptocurrency market. Also, as investors seek to unload their holdings and limit their losses in the face of ongoing uncertainty.
Why this Crypto crash?
Inflation, interest rate hikes by the US Federal Reserve, and the war in Ukraine driving up oil prices have all dampened market sentiment, which has spread to cryptocurrency.
Cryptocurrencies were presented as a separate asset category from financial markets, least affected by stock market instabilities. However, the last two weeks have demonstrated that cryptos are not immune to broader market sentiment. Last week, an estimated $200 billion in investor wealth was destroyed.
This asset class has always been volatile, and similar crashes have occurred in the past. Hence, in 2021 and in 2017 and it has recovered to all-time highs.