Why is crypto hitting a bear?
On June 13, 2022, a heavy cryptocurrency experienced a crash in the markets causing significant ripples for projects and entities alike. Bitcoin collapsed 15.1%, ending the day around $23,200, and slipped another 10% on June 14 morning on inertia before finding support from buyers after touching $20,800. According to decentralized finance or Defi, lending protocol Aave (AAVE), which lets users lend or borrow cryptocurrency without going to a centralized intermediary has fallen across nearly all stablecoin borrowings. The sourced data from Defi Llama indicates that Aave's total value locked has fallen from $33.51 billion last October to $8.11 billion, which is a shock for the crypto market. Most notably, borrowings for Binance USD (BUSD) now stand at a mere 30% compared to a high of 80% back in May.
These current fluctuations have been the major stump in shaking the faith of investors. Have you ever wondered what is letting down the most hyped currency?
Bitcoin collapsed in the massive decline since the March 2020 crisis amid falling stock markets and a rising US dollar. The December 2020 gap was closed by touching the area below the 200-week simple moving average. But in my opinion, Bitcoin should touch levels near 19500: the 2017 peak, which is also where the most aggressive growth phase started at the end of 2020, for a definitive return of long-term buyers.
Expecting a price any higher this time? Let’s take a dig at how Bitcoin could survive this meltdown.
The reasons for the crypto crash
It is the latest in a series of price crashes for the cryptocurrency, which has seen an evident big drop of more than 60 percent in value over the last seven months.
Several leading cryptocurrencies, including Ethereum (ETH), Cardano (ADA), Solana (SOL), and Dogecoin (DOGE) experienced even heavier losses than bitcoin, falling by between 15-25 percent over the past days.
Many crypto holders are in dilemma and liquidating their assets, while crypto lender Celsius told customers that they would be temporarily unable to withdraw funds from the platform.
In other news, such a steep market downturn may be panic-inducing, but the good news is that nothing new is happening. The crypto market’s growth is said to be put on the blame for such major downtrends. The evolution of the market from simple spot trading to derivatives trading has put the limelight on these pointers of a major crash in the crypto market.
- Multi-layered and inter-connected liabilities—staking, borrowing, derivatives trading—triggered a liquidity rush.
- Federal Reserve’s interest rate hike, as the central bank tries to undo quantitative easing that generated the highest inflation rate since December 1981.
- The immediate trigger for the crypto crash appears to be a massive sell-off by investors amid heightened inflation fears and pausing of withdrawal by crypto lending service Celsius.
The crypto market is hitting a bear and I would like you to take careful note of the hammer bars being formed in crypto at this very moment. Investors are also continuing to stay away from riskier assets, which is reflected in the stock markets. Seven Capitals provides you with true investment knowledge and helps you start your trading journey better without any hassles.