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What’s Behind the Cryptocurrency Shakeout? – Daily Flash Briefing

June 15, 2022 by Bautis Financial
Bitcoin and Cryptocurrency Falls

Bitcoin, the most popular cryptocurrency, is crashing. Here are some of the reasons why investors are fleeing cryptocurrencies.

Bitcoin has plunged more than 52% year to date and is now hovering around $21,000 per coin, according to data from Coindesk. Bitcoin has shed about 70% of its value since hitting an all-time high of roughly $69,000 in November.

The entire cryptocurrency market is feeling similar pain, with the overall market capitalization of assets dropping to less than $1 trillion from its November 2021 peak of $3 trillion. This is the first time since 2021 that the asset class has been worth less than $1 trillion.

Some of the price action in cryptocurrencies is due to recent news surrounding companies such as Terra and Celsius.

In May, Terra’s stable coin (UST) — which is meant to be pegged to the dollar — plummeted below 30 cents in value, prompting many investors to flee the asset. Luna, it’s sister coin, lost roughly 96% of its value at that time.

This past Monday, Celsius, a cryptocurrency lending firm, paused all account withdrawals, citing “extreme market conditions.” The news created fears that it will soon close.

The turmoil is nothing new, though. And given today’s macroeconomic environment — with the Federal Reserve tightening interest rates to hopefully beat down inflation — some cryptocurrency investors think prices may fall further. Crypto companies are also preparing for a recession and possible “crypto winter,” or when prices fall and stay low for an extended period.

On the plus side, the dip in price doesn’t mean that long-term investors have to hold off on buying Bitcoin, especially if they see a deal in the asset.

Related: The Pros and Cons of Adding Cryptocurrency to Your Portfolio

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Category: Finance News, InvestmentsTag: Bitcoin, Crypto Winter, Cryptocurrency
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