After enjoying a remarkable amount of growth in 2021, the cryptocurrency markets showed their volatile nature when the market crashed on January 24. The values of Bitcoin, Ethereum and Dogecoin all dropped down due to the fresh crash. The cryptocurrency market started 2022 quite positively, with a good performance in November and early December.
Bitcoin in particular had a very successful 2021, reaching a value of £50,546.71. However, the value of $34,000 that Bitcoin plunged to in January was its lowest after July 2021.
Why did the markets crash?
Last summer, the Chinese government launched a crackdown on cryptocurrencies, warning investors against trading. They also banned financial institutions from offering crypto services completely. Moreover, Elon Musk also announced that Tesla would no longer accept Bitcoin as a mode of payment.
— August Musk (@augustmusk) February 24, 2022
As a result, Bitcoin declined to an eye-catching low value of £21,719.56, half the value it possessed in April. After recovering in the fall, the market suffered another crash in the winter.
According to Bloomberg, the crypto market lost $1 trillion overall due to the downward spiral that started in winter. The Bespoke Investment Group revealed that this was the second-largest decline in terms of dollar amounts.
Russia’s invasion of Ukraine has also influenced the market, causing further volatility in the prices of tokens. The change in geopolitical relationships has also had a big effect on business. And as a result, the volatility of the market has increased much more.
Earlier, Russia announced clampdowns on cryptocurrencies as well, which has further influenced the nature of the market.
What lies ahead?
The stock market’s worst month since March 2020 was mainly due to a continuous inflation surge. The Federal Reserve is expected to counteract inflation by having a meeting in March 2022 and announcing new and raised rates.
There is also a chance of the US government coming in and forming their own government-issued cryptocurrency. This could further influence the trend of the market and would make it hard to predict how the market would react to such a major move.
The way the war between Russia and Ukraine is resolved will also determine how strongly the market volatility is dealt with.
Bitcoin, in particular, seems to have recovered from the dip in value and is currently trading around $43-44 thousand. However, this is nowhere near the peak value that the token reached in November.
The same can be said for Ethereum, which is the second most popular token after Bitcoin. It also reached its peak value in November and has now stumbled to around half the value.
"what should I invest in to get through the crash?"
Hold cash if you have it.
Reduce your outgoings.
Old spiritual texts will help too.
— The Corona Cure (@TheCoronaCure_) March 4, 2022
Will the market recover?
Over the past 24 hours at the time of writing, the market has been experiencing yet another brief dip. For new investors, this could be a good time to start considering new opportunities since the cost of starting is relatively lower.
But, since people have been selling off their cryptocurrency holdings, the market volatility has risen. And currently, it is nowhere near close to the peaks that it reached in the winter.
With the potential that the Metaverse, NFTs and blockchain technology have stored, it is expected that the market will experience a bullish run again. But while the future is bright, the short-term situation of the market is not as promising in the broad sense (Some tokens are going against the trend and are experiencing growth, even now).
But this could all change just as quickly since volatility is the name of the game when it comes to the cryptocurrency market. However, it is difficult to place a concrete timeframe on the behaviour of the market as of right now.