The crypto market posted the biggest drop of the year, sending bitcoin prices to the lowest recorded in February.
The downtrend, which started after Tesla announced that it would not accept Bitcoin as a payment instrument, got worse after China announced that cryptos were banned.
The resulting decline brought the crypto market back more than 10% of its cumulative value as Bitcoin dropped to $ 30,000.
In the midst of the downturn, fear in the crypto market reached the level last recorded in April 2020.
The market decline that started over the weekend caused a lot of doubt in the minds of investors as the Bitcoin price dropped heavily and hit the lowest recorded in February most recently. Fears worsened as cryptocurrency exchanges like WazirX in India couldn't manage high transaction volumes.
On Wednesday, things got worse as major crypto assets such as Bitcoin, Ethereum, Binance Coin and Dogecoin came face to face. Bitcoin approached $ 30,000 as the overall crypto market lost about 10% of its value. Well, here are five reasons for the biggest market decline in my opinion.
1. Tesla Says No
The decline in the market started in earnest, contradicting previous statements when Tesla's CEO Elon Musk announced that the electric car maker would not accept Bitcoin as payment last week. The company has also previously purchased $ 1.5 billion worth of Bitcoin.
In 2021, Elon Musk and his electric car company made a major contribution to the growth of Bitcoin and other cryptos, especially Dogecoin. The news from a prominent crypto figure was devastating and was sending Bitcoin and Ethereum in a downward spiral.
2. Announcement of China
One of the major reasons for the decline in the crypto market was triggered by the People's Republic of China. On Tuesday, China announced that financial institutions and payment companies are banned from providing any services related to cryptocurrency transactions.
In 2017, China closed local cryptocurrency exchanges at a time when the country accounted for about 90% of all Bitcoin transactions. While there was no news that triggered the fall, it added more fuel to an already violent fire.
3.The Grayscale Sale Expands Even More
Grayscale, another big player in the crypto market, may have been at the bottom indirectly. The "Grayscale Discount" represents the difference between the Bitcoin price and the spot market price as implied by the trading level of Grayscale Bitcoin Trust stocks.
In addition to the news that fueled the downtrend, the Grayscale Sale dropped to a record low of 25%. According to Arcane, the increased discount poses and still does to Bitcoin a short-term risk.
The crypto market is starting to see the light as major cryptos start to gain
Bitcoin is currently traded around $ 40,000, Ethereum is close to $ 2.7000 and Binance Coin is traded at $ 373.
While the recovery in the market has been slow, the industry may have recovered from the bottom and opened up a great opportunity for investors to buy assets.
4. Fear
Fear and greed; the two biggest enemies of the market. As the market plummeted with increasing uncertainty stemming from China's announcement, fear among investors has become immeasurable. Market sentiment on Tuesday dropped to the "extreme fear" level last seen in April 2020, according to the Crypto Fear and Greed Index.
5.Negative posts
Amidst the downturn in the market, the pressure around cryptocurrencies did little to alleviate tensions in the market. While investors and traders were already in fear, the negative press made the situation worse. More than most, the crypto market is heavily influenced by the news.
The fear and the resulting suspicion caused investors to sell more and the crypto market to go down further. Arcane analysts have generally felt that "an extremely fearful market like this offers historically solid buying opportunities during bullish cycles."
For these reasons, there have been very severe shocks in the crypto exchange, but I think this decline will take a short time.
