Latest Crypto Crash News: Why Is Crypto Crashing Today | GettAds
Reasons for Crypto Crash, liquidity lacks, Fear of Security Breach, Volatility created by crypto influencers, The stock market’s correlations Crackdowns by ED, Russia-Ukraine War, Terra Luna Crises
The crypto market just saw one of its greatest falls. Since reaching an all-time high late last year, the price of Bitcoin and several other cryptocurrencies have been falling.
The crisis began a few months ago when the Terra ecosystem shrank from $40 billion to almost nothing. On its platform, it supports two coins Terra USD and Luna.
Since they were intended to be stablecoins, they were tied to a more secure asset, such as the US dollar. But when these two tokens began to plummet in the month of May, chaos ensued. Terra USD is presently trading at 5-8 cents to the dollar, with a peg of $1. The endurance of the stable currency ecosystem and the legitimacy of the cryptosystem were fundamentally questioned by a crash like the one that occurred in Luna.
The British pound is being destroyed by the power of the US dollar. Additionally, it is harming the market for risky assets, resulting in a crypto meltdown.
Reasons for Crypto Crash
- liquidity lacks
There isn’t always a queue of eager buyers waiting to pounce on unsold coins, unlike the stock market. This helps to explain why crypto crashes typically occur on the weekends. Fewer investors are interested in buying when a lot of coins are sold.
- Fear of Security Breach
According to Peters, a crypto crash might also be caused by network security and the blockchain. Like how government actors’ regulatory interference might play out in a collapse.
- Volatility created by crypto influencers
A money inflow might be sparked by tweets from important individuals and crypto fans. Obviously, Elon Musk’s support of Dogecoin has demonstrated that this is a possibility. It is also conceivable for tweeting to have the opposite effect.
- The stock market’s correlations
One benefit of cryptocurrencies is their independence f. It should thus float separately from the rest of the market. That’s not always the case, as 2022 has demonstrated. “Over the last several years, traditional markets have embraced cryptocurrencies, and as a result, they have become more intertwined. Some claim there is a strong correlation between the bitcoin market and the stock market “explains Peters.
Reasons for Crypto Crash in India
- Taxes on VDAs (Virtual Digital Assets)
Following the Budget statement made to that effect by Union Minister of Finance Nirmala Sitharaman in February of this year, revenues resulting from cryptocurrency trades become taxable as of April 1, 2022.
In addition to tax deducted at source (TDS) ramifications, she announced a 30% tax on virtual digital assets (VDAs) that would take effect in July 2022.
Even if the cryptocurrency market has been in a downward trend since the beginning of the year, the introduction of taxes has also had an influence on the declining quantities of cryptocurrency in India. The trade volumes of the biggest crypto exchanges significantly decreased when the crypto taxes went into force.
- Crackdowns by ED
The Economic Times reported in August 2022 that the ED was investigating at least 10 cryptocurrency exchanges for allegedly helping foreign firms utilise cryptocurrencies to launder money.
In the quick lending app case, it was established by a government agency that the defendant businesses had laundered more than Rs 1,000 crore, with most of the claims having ties to China. The Bengaluru Cell of the ED conducted a search of CoinSwitch Kuber’s offices in India during the same month.
ED continues to take enforcement action against cryptocurrency exchanges for fraud and poor management.
- Russia-Ukraine War
The world market for cryptocurrencies has been severely disrupted by the Russia-Ukraine War. On February 24, 2022, as Russia began a full-scale attack on Ukraine, the market value of all cryptocurrencies fell to as low as $1.57 trillion, losing about 9.66% in the previous 24 hours.
It has long been believed that Russia may utilise cryptocurrencies to evade controls and lessen the effects of the sanctions. It might also sign agreements with anybody operating internationally who uses digital currencies to transact with them.
The conflict in Ukraine has a significant negative influence on cryptocurrency prices. During moments of substantial global unrest, people felt significantly more at ease investing in the safest, most established, and consistently profitable asset classes.
- Terra Luna Crises
The catastrophic collapse of the Terra Stablecoin in May 2022 cost the cryptocurrency world more than $200 billion. The value of Terra Luna coins decreased as the price plummeted by about 80%. It should be highlighted that stablecoins adhere to supply and demand economics. Any stable currency that is produced must be backed by collateral in order to maintain the price stability.
The 1:1 relationship between the dollar and TerraUSD (UST), the blockchain-based cryptocurrency stablecoin, has also been lost. It currently trades at $0.6131. According to Coinmarketcap, Terra (LUNA) was one of the top 10 cryptocurrencies by market capitalization prior to this upheaval, and TerraUSD (UST) was the largest decentralised crypto stablecoin in the world.
On the contrary, if you have unwavering faith and an 8–10-year time horizon, you can decide to persevere. Before cheap money once more floods the international stock markets, only a few years will pass. Additionally, resilience and governance both improve.