Why the Crypto Market Crashed Again
The cryptocurrency market has lost more than $1 trillion in value in the last six weeks. This has left both experienced investors and newcomers to the market extremely disappointed. The crypto market is already notorious for its volatility, but this time the situation has become even more difficult.
In a report on this subject, CNN said on Tuesday (November 25) that when the price of Bitcoin reached an all-time high of $126,000 in early October, many thought the market would go even higher. But since then, the rapid decline has begun!
Last Friday (November 21), the price of Bitcoin fell below $81,000. However, the market rebounded slightly over the weekend. On Monday (November 24), the price rose above $88,000.
Still, according to analysts, crypto prices are still on an overall downward trend. This month stands as one of the worst times in crypto history. According to Deutsche Bank analysts, this time the collapse was not just caused by retail investor speculation like previous crashes. Rather, institutional investment, policymakers’ decisions, and global economic pressures have further complicated the situation.
One of the biggest reasons for this collapse is the uncertainty over the US Federal Reserve’s interest rate cut. Technology stocks and digital assets are both very sensitive to changes in interest rates. Investors are now in doubt – will the Fed cut interest rates quickly, or will the situation become more stringent? In addition, the fear of a possible bubble bursting in the artificial intelligence sector is also creating additional pressure on the market.
Added to this was the sudden ‘flash crash’ on October 10. On that day, former President Donald Trump hinted at a trade war with China, causing panic in the market. The positions of investors who had taken excessive leverage began to be automatically liquidated. $19 billion disappeared from the market in a single day. Many investors decided to leave the market right then, which further increased the decline.
Another thing is that last year there was a huge influx of money from mainstream investors through approved spot Bitcoin funds. They are not confident in the idea of crypto; they see it like stocks or other high-risk assets. As a result, they withdraw from the market at the slightest volatility, which further increases the pressure.
“Bitcoin is now in the hands of mainstream investors, and they see it as a normal risk asset,” said Steve Sosnik, chief strategist at ‘Interactive Brokers.’ So the current situation indicates that the volatility in the market may continue for some time.
