Anyone who has been following the cryptocurrency market knows that it has been a disaster. The only lingering question is, "Why?"
The truth is that there is no straightforward solution, but a variety of factors may be at play.
What is causing bitcoin and other cryptocurrencies to plummet?
Bank of America worldwide crypto and virtual asset analyst Alkesh Shah told Forbes this week that increasing hyperinflation, interest rate rises, and political upheaval induced by the Ukraine crisis might all be factors.
Crypto has been hit hard by these issues. Despite a slower pace of inflation in April compared to the preceding month, prices grew faster than projected. For the first time in more than two decades, the Federal Reserve raised interest rates by half a point this month. There are no signs that Russia is easing off on its assault on Ukraine.
As a consequence, the value of cryptocurrencies plunged by $200 billion in only 24 hours, which was a huge drop. In the last 90 days, the price of Bitcoin, which accounts for around 44 percent of the market, has fallen to $28,941 on Thursday (12 May).
The recent decline in the financial markets has a strong tie to the state of the cryptocurrency market. Bank of America strategists stated earlier in the month that Bitcoin is acting like a risky asset to invest in rather than an inflation hedge.
That being said, bitcoin is still a good investment opportunity and one should still take some time to conduct some research on how cryptocurrencies work since cryptocurrency is the future. But potential crypto buyers should pay attention. Cryptocurrencies are an unregulated market, and buying crypto can be a risky business. Unless users stick to reliable and trusted exchanges such as Binance, Coinbase, and eToro.
Is the crypto market going to rebound?
Bitcoin's return to the $30,000 mark ($30,300 on 17th May) has boosted the revival of the cryptocurrency market.
There are many Wall Street corporations with specialized cryptocurrency groups. Allan Howard and Paul Tudor Jones, two of the most prominent hedge fund managers, are investing billions of dollars into virtual currencies. The Queen's Speech measures are aimed at preventing fraudsters from using crypto assets, but nothing is written about how to safeguard investors.
To avoid future losses, quick actions from regulators are more likely to keep cryptocurrencies from losing any fundamental value. According to a Nuveen exec: "What gets penalized when economic circumstances are toughening?." Anything with a high price tag and an unknown or quasi revenue stream is considered risky.
There is no income stream and unquestionably high values in the bitcoin space. That's a lot like what we've seen with tech and development stocks. It's linked, but since the marketplace is less fluid, it's more unpredictable."