The world of cryptos, which has made many millionaires overnight in the last few years, is currently experiencing a bearish phase. The crypto market has gone down by trillions almost every day this month. And even the oldest and the largest crypto, Bitcoin, has not been able to escape this fall. But Why? Why Is Bitcoin Going Down? Let’s find out!
First Off, Why Is Bitcoin Going Down?
The price of Bitcoin has been witnessing a decline since its all-time high of $69,044.77 (more than INR 53 Lakh) in November 2021. Today, as of May 16, its price is hovering around $29,000 (around INR 22 Lakh), which is even less than 50% of its price in November. So, what happened? What has caused this massive bitcoin crash?
Read About: Crypto Investing: Is it right for you?
Well, there are various factors that are contributing to this bitcoin plunge; let’s discuss them one by one in detail below –
High Inflation –
The covid-19 pandemic has severely affected the labour and consumption market in the last 3 years. As a result, the United Nations, in its recent report, has projected that global inflation is set to increase to 6.7% in 2022. This figure is more than double the average of 2.9% during 2010–2020.
Drying up of Liquidity –
The liquidity in the crypto market is experiencing a dry run mainly due to two reasons. Firstly, there has been a tightening of norms by the Fed and other central banks. And secondly, owing to the round-up of the Covid-19 pandemic, is squeezing away investors’ time which they earlier used to put into investing in cryptos.
De-Risking Sentiment –
Another factor that is being attributed to the bitcoin plunge is the ongoing risk-off sentiment among the investors. Bitcoin, being a crypto, is subject to high volatility and is currently facing the burn due to the growing risk aversion among the investors who seem to be more comfortable parking their funds in safe financial instruments given the inflation and stock market dumps.
Rising Geo-political Crisis –
The ongoing geo-political war between Russia and Ukraine has further shaken up the confidence of investors in cryptos. The crisis is adding to market uncertainties and is thus causing a bitcoin crash and a dip in the value of other cryptos as well.
Read About: Why Investors are Confident Despite Price Drop of Bitcoin
Bitcoin price wrap up
Last week on May 13, 2022, Bitcoin fell below $26,000 (around INR 20 Lakh) for the first time in the last 16 months. This fell struck out more than $200 billion (over INR 15.5 Lakh Crore) from the entire crypto market in a single day. This might seem like a good buying opportunity to buy Bitcoins, right? Well, it is.
As the saying goes, what goes up, also comes down! But the opposite of it is also true when it comes to digital assets, be it stocks or cryptos. The current time can be viewed as a golden opportunity where the world’s largest and oldest crypto, Bitcoin, is available at significantly low levels.
During 2020 and 2021, Bitcoin marked a new trajectory on its price graph, reaching over $60,000 (more than INR 46 Lakh) mark from below $10,000 (more than INR 7.5 Lakh) levels at the beginning of the pandemic-hit 2020. However, right before the beginning of 2021, it again plunged and hit a yearly low of $30,000 (around INR 23 Lakh), just to again rise to its all-time high mark of $69,044.77 (more than INR 53 Lakh) last year in November. And now again, the down trail has started where we can see bitcoin crashing and surviving near $29000 (INR 22.5 Lakh).
An investor can only taste success if they remain disciplined. It is the market’s nature to be dynamic and hit different lows and highs. But, as an investor, one must take these decisions rationally and only after thorough research.
Take Away
Bitcoin started its journey in 2009 with a value of $0 and has since seen various highs and lows, including a recent price level breach of $69,000. The crypto market is indeed highly dynamic and sensitive to almost all economic and geo-political issues. However, at the end of the day, it remains a financial instrument that works on principles and logic. So, if you are also planning to begin your investment journey with cryptos, wait no further and start trading on Zebpay today.
