Bitcoin and other digital currencies fell to their lowest levels on Saturday, with the continuing collapse wiping out roughly $1 trillion from the worldwide crypto market value. Bitcoin fell below its psychologically crucial support level of $40,000 Friday, tumbling more than 10% in what was a broad market sell-off.
Bitcoin is currently priced at $35,700, despite a significant increase in trading activity, suggesting a large sell-off is underway. The cryptocurrency has dropped approximately 50% from it’s all-time high of $69,000.
The world’s top 100 cryptocurrencies have all been trading in the red, with some tokens declining by as much as 30%. Ether, the second-largest cryptocurrency, has broken below its $3,000 support level. It has fallen 15% in the last 24 hours to $2,400. Binance Coin is down over 17%, while Cardano has dropped 16%. Dogecoin has lost nearly 13% of its value while Solana and Polkadot have each plummeted 20%.
What Triggered The Crash?
The Russian Central Bank’s proposal to prohibit cryptocurrency is thought to be the main reason for the current slump. The Russian Central Bank announced yesterday that it wanted to propose a ban on all cryptocurrency usage and mining in Russia to the government.
According to the bank, this move would be implemented due to the dangers that bitcoin poses to financial stability, monetary policy sovereignty, and individual financial security.
In Russia, cryptocurrencies have a tumultuous legal history. While the Russian government has been resistant to cryptocurrencies for years, citing terror financing concerns, it had given them legality in 2020.
The ban on the tokens’ usage as payments, however, came into effect. The Russian central bank’s suggestion for a bitcoin ban has had little impact on the price of Bitcoins, which have been trading in the red for some time.
Federal Reserve’s Hawkish Stance
The dollar’s fall has been aided by wider macroeconomic situations, the Fed’s hawkish posture and decision to raise interest rates as soon as March, and soft earnings from technology firms.
The US Federal Reserve, which is perhaps the most crucial central bank in the world, is predicted to raise interest rates multiple times throughout the year in an effort to control rising inflation in the United States.
The hawkish stance of the US Federal Reserve has caused investors to be more cautious about their investments, despite dismal macroeconomic data owing to the COVID-19 wave.
Sell-Off on Wall Street
As a result, riskier assets like cryptocurrencies and stocks in technology and growth industries have suffered significant losses. Tech company earnings have also been lower, adding to the market’s downturn.
Growing Correlation With Traditional Market!
According to market researchers, Bitcoin’s relationship with Wall Street is increasing as a result of growing institutional involvement in cryptocurrency. As a result, when Wall Street sees a drop, it spreads throughout the crypto industry.
Leveraged Long Position
Another reason for the drop is a levered long position. Investors who had long crypto bets and expected the price to rise are selling their stakes.
Over the previous 24 hours, over $1 billion in long bets were terminated, according to coinglass.com. Bitcoin topped the table, with $250 million of liquidations, followed by Ether at $160 million.
Despite the Russian government’s opposition, gaining a legal status had made Russia one of the world’s quickest adopters of cryptocurrency.
China’s ban on cryptocurrencies has caused a similar collapse in the past, and the crypto market subsequently recouped its losses before rising. However, in order to compete with China and the USA, Russia had established itself as the world’s third-largest Bitcoin mining center.
Now, the announcement of a ban has ruined market optimism when global circumstances have already brought significant selling pressure to the crypto sector. When panic selling is added to leverage, the result is frequently a market calamity that operates 24 hours a day, seven days a week.
Though this is not the crypto’s first major decline in the last two years, investors claim that a 30% drop is nothing more than a blip in the bull run that crypto appears to be on.