The recent downfall left holders wonder why crypto is crashing and what it means.
Fluctuations in the 10% range are very common for digital currencies. A price decline often impacts multiple cryptos, naturally causing coin holders to worry. The more they lose, the more they are concerned about it: 10% of all their asset value can amount to quite a large sum.
It is exactly what has been happening lately: after reaching its new all-time peak of $1 trillion in market value in February, 2021, bitcoin slid back to $900 billion the very next week.
Why is crypto crashing now? Let us consider the previous crash of bitcoin, preceded by the so-called Great Crypto Boom of 2017 when Bitcoin skyrocketed from $1,000/BTC on January 1 to almost $20,000 in mid-December the same year.
If we look at the BTC price over the 2018 period, we notice that it had dropped about 80 per cent. Skeptics were ready to celebrate the “death” of Bitcoin, but its prices rose to the moon again this year.
So why is the crypto market crashing?
What can you do about it?
Could you predict it?
Why is the crypto market crashing and how to recover from it
The knowledge of the causes of the crash will help a crypto holder to predict the next fall, prepare for it, and turn it to the best of their advantage.
As you may have already guessed, the immediate reason for the recent Bitcoin crash was its preceding rise. The rise, in turn, was fueled by market manipulations. To be specific, a single tweet of Elon Musk here and Tesla announcement there, Wall Street media support, and MasterCard further fueling up the interest – all of these can pretty much be considered manipulations.
It is like a tunnel effect. As soon as public interest in Bitcoin was refueled, traders rushed to restock their reserves, looking for a long-term profit. The rising demand led to the price increase. So why is crypto crashing today? Because the buyers have had enough and the demand dropped dramatically. To sell any of it, one must reduce the price. The financial bubble has burst.
Why is crypto crashing: your counter-measures
The right thing to do is to make mindful investments in the first place. Look for genuinely useful technologies and their respective tokens/coins. Prefer the ones tradable for goods and services directly (most coins claim to have “exchange value” and nothing beside that: they usually end up dead).
Diversify your coins, although that may not be of much use since the prices of major coins rise and fall together.
Have patience and do not sell everything the moment you notice the market crash. Just look at the BTC price history: high-risk high-reward games may bring some profit if you buy some more of it when it’s in the local minimum, instead of selling it during the drop.
Why is crypto crashing today
Following our breakdown of Bitcoin’s rise and fall, it is easy to answer the question, ‘Why is crypto crashing today?’ Most cryptos are not tied to material assets or services, and their market value is determined by how much traders think it’s worth at the moment. The flashy papers we used to call money are not different in this regard. Money only has value because people believe that it has value. It used to represent real-world material value until Nixon banished that rule.
In such circumstances, when most traders lose trust into a given crypto, you’ll witness the crash, and it will be like a tunnel effect, too.
To elaborate upon why is the crypto market crashing as a whole when a single major digital currency suffers a price drop, we’ll take as an example the same recent crash when ETH, XRP, LTC, BCH, and DOGE followed BTC and together caused the greatest, $400 billion total loss in market history.
One explanation for this is that the market is heavily influenced by traders’ emotional swings. When they notice that BTC loses value, they anticipate that the other coins in their portfolio will deteriorate and start selling them. It creates excessive supply and the following price drop. The more it drops, the more automatic stop-loss trades are triggered, and so on.
Why is crypto crashing now: it had it coming
With our basic advice and some practice you won’t care why is crypto crashing today or anytime else. Here’s a final advice though.
One could witness a peculiar scheme on Waves Exchange back in its early days. A scammer had created a scripted token—naming it, say, “Surge”—which was programmed to rise in price every day, or even every hour.
Of course, the scammer himself was the person who provided the initial supply of tokens. They didn’t have to care what would happen after they’d sold as much as possible and got away with easy money.
Those naive enough to toy with Surge thought that they’ll make profit because the script guaranteed it. Instead, only those lucky enough to sell their Surge to the other naive traders (the FOMO buyers) in time profited while everyone else ended up with nothing.
Surge became too expensive. For that reason, no one was willing to exchange it for their tokens and there was nothing else that could be bought for it.
After the scammer successfully launched and sold Surge 2.0 people have learned their lesson the hard way: stay away from surging tokens.
The bottom line is as follows: when you find yourself wondering, ‘Why is crypto crashing so hard?’, it may be the last chance to make the bear move and sell it. It is crashing because is has been surging up until now.
So be careful and keep an open eye for Surge-like coins!