It’s not news that the cryptocurrency market has been struggling for the last few months. This has been the case since November 2021. It started after the Federal Reserve announced that it would make some financial changes to beat inflation caused by the COVID-19 pandemic. This news hugely impacted the cryptocurrency market cap. The latest was a drop from $1.10 trillion at the beginning of June to $1.02 trillion to $977 billion by June 13.
Explanations for the drop
The cryptocurrency market cap is down by 12% from the 12th to the 13th of June. Many cryptocurrency tokens are currently half or less than their highest value. Some of the given explanations for the drop are:
- The economic situation in the world
- Increase in the interest rates
This article will dive into the core root of the crypto crash happening since the weekend. It will also explain why all the cryptocurrency tokens lost a huge portion of their value, with some losing double-figure percentages. According to financial and economic experts, the main reason for the crash was the massive sell-out by investors. The forces of demand and supply determine the value of a commodity. When demand is high, and supply is low the price increases. But in this case, the demand was low, and supply was high, leading to the market crash. Some investors sold all their tokens to avoid losing money in the crypto crash. This meant that the price of the cryptocurrency had to go down.
Factors leading to the massive sell by crypto investors
The two main factors that fueled this recession are: this is one of the reasons that led to the crash over the weekend. As more people sell their portfolios in a dwindling market with decreased demand, the value will continue decreasing.
- Investors deemed it wise to sell their portfolios as fears of increased inflation increased worldwide.
Inflation seems to be the main root of all evil. It affects the economy and investment and appears in all news articles. The inflation has caused the Federal Reserve to threaten an increase in interest rates, leading to the effects being witnessed in the market.
- The second effect is Celsius.
Celsius, an exchange platform, paused its withdrawal services on its platform. This was a red flag for many investors as they feared the worse and sold their holdings. These two factors and the fact that many investors are staying away from risky assets continue to threaten cryptocurrency’s value and existence. Investors are investing in assets that don’t suffer from volatility and uncertainty. According to experts, if this trend continues, only a few existing altcoins will survive the crash.
