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Crisis mode in the crypto universe: Bitcoin crashes – is the crypto market now collapsing?

3 min read

When the Bitcoin Spot ETF was finally approved by the SEC in the USA last week after years of tough struggle, many experts predicted a price explosion, especially for Bitcoin. In fact, the Bitcoin price has exploded, but probably not in the way many would have liked. In fact, the price of BTC has fallen – by 6% in the last four weeks and, in keeping with tradition, the prices of altcoins have also fallen. Ethereum lost 4.5% over the month and Solana even lost 29%.

Why is the Bitcoin price crashing?

As you might expect, there are of course people again who are conjuring up a dystopian future for all cryptocurrencies. You almost think you can hear shouts like: “The end is near”. The atmosphere almost feels like 2022, after the Terra/Luna crash and the FTX bankruptcy. But if 2022 has taught us anything, it’s that the crypto universe isn’t going to die so easily. There is no one reason why the crypto market is consolidating. A few factors probably come into play.

Bad market sentiment

The mood on the crypto market has deteriorated. The Fear and Greed Index on Coinmarktcap is currently at 50 – so the mood is neutral.
Inflation almost certainly plays a role as well, as does the Fed’s interest rate policy. Traders are actually waiting for the key interest rate to be cut, but at the moment both the FED and the ECB are reluctant to take this step. In addition, the crypto market itself is very volatile. This means that the prices fluctuate greatly. Anyone who invests in cryptos should have strong nerves.

Taking profits

Another reason for the sudden drop in prices is probably profit-taking, which is not that rare and also occurs on the stock market. Some traders probably wanted to reap the fruits of their labor. In fact, some long positions were liquidated. Around 19,200 Bitcoin from Grayscale’s GBTC flowed to Coinbase, which also increased selling pressure.

The long shadow of Mt. Gox and FTX still existed

The former Bitcoin exchange Mt. Gox went bankrupt in 2014, but most investors are still waiting for their compensation – and that should now flow. The asset manager wants to pay out around 142,000 Bitcoin to creditors, which should also increase selling pressure. It should be assumed that not all investors immediately throw their Bitcoin back onto the market. Then there was the matter with the crypto exchange FTX, which went bankrupt in November 2022. Here too, creditors want to be compensated. Almost 1/3 of the Grayscale sales mentioned above are accounted for by FTX.

Perspectives after the crash

The crypto world probably won’t end overnight. There have always been price drops, which is also due to the much-cited volatility of the crypto market. The stock market was also repeatedly plagued by crashes; some readers may remember the bursting of the US real estate bubble and the subsequent lurch in the economy. Which, by the way, was the trigger for the creation of Bitcoin. Or the bursting of the dot-com bubble in the noughties. It will probably look similar with cryptocurrencies. However, how long it will take for prices to rise again cannot be predicted at this point. But you should keep in mind that the Bitcoin halving is coming in April 2024. In recent years, this event has always been accompanied by a bull market.

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All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.