The global digital currency market has seemed to encounter a massive crash that has brought down the prices of various important crypto too low. There has been a huge alteration in the list of top cryptos in the market due to the latest crypto market crash. With that let us have a look at some of the latest crypto news.
Crypto Market Crash: What Is Happening In The Crypto Space?
Data on CoinMarketCap portrays that Terra (LUNA), which was among the top cryptos in the last few years, decreased to the 59th rank, losing more than 99% of its value in the past 7 days. In the past 24 hours, the value of this crypto has decreased by more than 96%.
Talking about the crypto market crash, it is important to mention that Bitcoin (BTC) has lost more than 28% of its value in the past 7 days. At the time of writing this, the value of Bitcoin was just $28,315.60. In the meantime, the value of Terra which is anticipated to be the price driver of the present crypto market crash has decreased by 32% in the past 7 days. In the last 24 hours, the price of UST decreased by more than 18% to $0.4816 (at the time of writing).
Here is a look at some of the primary updates and developments from crypto markets:
1. While the value of Bitcoin decreased by 9 percent in the past 24 hours, ETH decreased by 15 percent and altcoins such as LUNA decreased by more than 90 percent. Even though the small crypto crash recovery took BTC above $32,000 on 11 May 2022, the existing overhead selling pressure of Bitcoin and high fear in the market took the value of the coin down to $28,315.60.
2. According to Darshan Bathija, CO founder & CEO, Vauld,
“Data showed that the rate of BTC exchange inflow remained relatively high in the last couple of days. Investors often transfer their holdings to exchanges when they intend to sell.”
3. The Luna crypto decreased below $1, while the stablecoin of the blockchain that is UST lost its peg once again.
Along with that, the total value that was locked on Anchor decreased by $11 billion in the last few days.
4. The algorithmic stablecoin UST of Terra crashed to a new low of nearly $0.30 after it lost its peg to dollars.
5. As per Edul Patel CEO & Co-founder, of Mudrex,
“Bitcoin hit its lowest at US$28,000 in the past 24 hours, which is the weakest since 2020. BTC appears to be at oversold levels with increasing selling pressure. Since yesterday, BTC has been struggling to find its support between US$27,000 and US$30,000. It is also likely that BTC may even break below the current level. Along with macroeconomic factors, the collapse of UST has largely impacted the crypto market. It may take some time for cryptocurrencies to recover from this crash.”
6. As per Bathija, most of the stablecoins such as USDC and Tether are pegged by assets like bonds or cash. In such scenarios of algorithmic stablecoins, such as UST, they are supposed to be mechanically backed to the value of another virtual asset. He said
“One UST can be redeemed or minted for exactly $1 worth of Luna. Luna Foundation Guard (LFG), the non-profit foundation created to support the Terra Ecosystem, bought various cryptocurrencies including Bitcoin in order to maintain the stable coin’s peg.”
7. Previously in this week, when BTC decreased to $30,000, the reserve ratio of LGF to UST issued also fell, bounding LFG for liquidating its Bitcoin reserves. Bathija said,
“The effect of this move is not only being felt in the market but has also raised concerns from regulators. U.S. Treasury Secretary Janet Yellen cited the UST issue to push for stablecoin regulation.”
Crypto Market Crash: Looking At Tether
Amid UST and Terra breakdowns, the value of the most used stablecoin and the third largest crypto across the globe gave its investors some serious tensions and its value decreased by 5%. The value of USDT decreased to $0.95 at nearly 12.49 pm, as per the data on CoinMarketCap. Just one day prior to this crypto market crash, this crypto was successfully trading at $1.
USDT is presently the third biggest cryptocurrency in respect to market capitalization after Bitcoin (BTC) and Ethereum (ETH). the digital currency following USDT in the list of top 10 stablecoins named USD Coin. Despite the prevailing crypto market crash, there have been a lot of alterations in the top 10 list.
What Is Causing The Present Crypto Market Crash?
As the value of Bitcoin has been seen to go down below $33,000 for the first time in the last 12 months along with the value of Cardano and Ethereum shaking, there seems to be a massive crypto market crash. In the above section we have spoken about the various market scenarios, and so now let us have a look at the reason behind this crypto market crash.
Inflation, War, And Downturn
As per the co-founder of automated crypto trading platform Coinrule, the crypto market is undergoing the similar pressures as other segments of the economy, which leads to a decrease in prices. He said,
“It’s not just crypto that’s down, everything is down, and over the next 6-12 months the economic outlook is bad. Central Banks are between a rock and a hard place with regard to slow economic growth and high inflation. So, investors are escaping ‘risk-on’ assets like crypto and tech stocks.”
If you are concerned about whether this downturn highlights the starting of a long run trend or is a temporary scenario, the co-founder of Coinrule believes that the industry should stay challenging for nearly 2 years. Having said that, he added that situations could worsen as well.
Sam Kopelman of crypto exchange Luno approved that the misfortunes of cryptos like BTC were not taking place in isolation. He said,
“Falling below $30,000 leaves bitcoin on the precipice of a key support level. If Bitcoin falls below this support level, it could even drop further to $25,000 before any significant move back up.”
He further added that,
“Investors dumped assets across the board yesterday as global stocks suffered the worst day since June 2020. The market is battling the consequences of rapidly rising US interest rates, alongside military conflict in Europe.”
As per the inflation report of this week received from the US Labor Department and the Office for National Statistics, the UK will likely encounter a knock on impact for the rates of interest and in turn the prices of crypto.
The crypto space has been under tremendous pressure over the last few days for several economic reasons. The values of cryptos like Bitcoin, Ethereum, Cardano, and stablecoins like Tether have fallen significantly leaving the investors in shock. This is the first time in the last 12 months that the Bitcoin price fell below $32,000 and Tether, which is pegged by the US dollar, traded below $1. To your doubt of will crypto recover, this crypto market crash can take serious outcomes in the future as per experts. Only time will say where this volatile market takes us.
Frequently Asked Questions On Crypto Market Crash
There are various reasons for the crypto market crash and some among them include market inflation, downturns, and war.
The latest crypto crash 2022 is being attributed to a loss of confidence in the crypto space among economic pressures across the globe brought on by the invasion of Russia on Ukraine and post Covid lockdowns.