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Billion-dollar Losses in the Crypto Market – What the New Crash Means

admin by admin
June 20, 2022
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Billion-dollar Losses in the Crypto Market – What the New Crash Means
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After the crypto prices have been in decline for weeks, the prices of the currencies fell significantly again this week. For example, the Bitcoin price currently stands at only 20,000 dollars per digital coin. The little brother of Bitcoin, Ethereum, even fell below the 1000 euro mark for a long time. Due to the losses of the two crypto giants, most altcoins also lost massively in value. For example, Cardano is currently below 50 dollar cents, Solana fell by almost 20% to temporarily below 30 dollars.

The massive crash of the last few days led to the fact that the general market capitalization of the crypto industry has fallen below the mark of one trillion dollars. But what do the losses mean for the overall market?

What are the reasons for the crash?

The main reason for the losses is likely to be the persistently high inflation, which is at a persistently high level in most industrialized countries. Such high inflation, in addition to a loss of purchasing power, leads to economic problems, such as a lack of consumer demand.

In addition, the fight against inflation on the capital market is feared. The US Federal Reserve is currently fighting high inflation with a radical interest rate policy, which leads to less money supply in the market and makes risky investments such as cryptocurrencies less attractive.

Concerns about the market

The distortions in the market are currently leading to more and more problems for some crypto projects and companies. Thus, the crypto-lending company Celsius announced that it would pause all transactions. The reason is the “extreme market conditions”.
Also, crash situations such as the failure of the stable coin Luna, which had to lose 99% of its value, currently cause massive losses of trust in the crypto market.
Meanwhile, the ever-falling prices are causing further problems. Thus, at low crypto prices, mining activities become much less attractive. Due to the currently low prices (with high energy costs), mining is no longer worthwhile in many parts of the world.

The consequences of the crisis

The consequences of the massive price losses are existential risks for the crypto industry. First and foremost, however, is the loss of trust that cryptocurrencies are currently suffering. Due to the enormously falling prices, the confidence of many in the ideas, innovations and projects that are currently taking place on the blockchain is dwindling. The result is capital deductions on a large scale. The currencies themselves suffer from this, but not least also listed companies. For example, Coinbase has already announced a hiring freeze to get through the crypto winter.

How will the crash end?

Currently, it seems that a turnaround in the crypto market can only be accompanied by falling inflation and stable economic data. As a result, tech stocks would initially rise. Cryptocurrencies would probably follow the rising prices of tech stocks with some delay. The reason for this is the flow of money. Tech and crypto investors are usually positioned similarly and usually invest in both industries. Since stocks are likely to promise more returns in a recovery phase, the money flows would probably only flow into the “safer” investment before the crypto prices would rise significantly again.

Are cryptocurrencies at an end?

Even if the prices of almost all cryptocurrencies are significantly under water in 2022, this does not mean the end of the crypto world. Progress and innovation will continue to develop and can only be restricted by strict regulators. Cryptocurrencies, like company shares, will survive the crash and thrive again after the “crypto winter”. However, it is also clear that not every coin will survive. In particular, scam coins and fun currencies could not survive the crypto winter. However, such readouts are important in order to be able to form a serious and profitable crypto market of the future.

You want to know everything about the Ethereum merge? Take a look here.

You want to know how the Bitcoin could react to the recession? Read our article here. Currently and only for a very limited time, you can get exclusive access to our Premium Discord area for only € 1 per day. In up to 50 topic areas, our moderators will discuss current trends and topics with you and the community. NFTs, Metaverse, Play2Earn, Chart analysis, Trading ideas for Day traders and Swing traders, DEFI, WEB3 Applications, Terra Luna Ecosystem, Aavegotchi, The Sandbox and so much more.

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