Why Is Crypto Crashing? Essential Insights For Investors

By Jay Dawson


Reviewed by: Jay Dawson


crypto crash

‘Why is crypto crashing?’ If you are planning to make a crypto investment or if you have already made a crypto investment, then you need to know this.

Crypto is a volatile market and it is not always supposed to surge and rise high. Therefore, you as an investor can not always expect the market to rise.

Crypto crashes are quite inevitable and a nature of the market. Here we will discuss the crypto crash and the possible reasons for this.

A Cryptocurrency Is……….

Crypto is a non-tangible virtual currency and is secured by cryptography. This means that crypto can not be made the subject of a double spend or counterfeit.

A cryptocurrency and any crypto are not used or controlled by a centralized authority or entity, which is the same reason they are characterised as decentralized. Therefore, no kind of government interference can happen in the governance of crypto.

However, there are jurisdiction, state, and federal level laws that ensure good conduct and govern the overall functioning of crypto.

The national and international governments have made sure that crypto can not be used for any kind of illegal or terrorist fundraising-related activities which has happened before.

The decentralised feature is what makes crypt popular among users. It also quick transactions and guarantees privacy and anonymity to the users.

What Is A Crypto Crash?

crypto crash

Crypto is a volatile digital asset that does not have a fixed value. The nature of crypto suggests significant and high price changes. Crypto prices can also fall down because of exchange crashes and coin crashes.

Some of the crypto crashes that have happened so far have been due to the systematic issues that are within crypto.

An example of this can be quoted as the FTX collapse that happened in 2022. Other than that, external and macroeconomic factors can also lead to a crypto crash.

The swings in interest rates and the impact of inflation can be said as the factors that can push the crypto values downwards.

All these contributing factors can affect the market sentiment of crypto as the trust and confidence that investors have towards crypto.

Crypto Crashes Previously?

Has a crypto crash occurred before? Yes, crypto crashes have occurred many times before. Let us provide you with a few examples.

In December 2018, the price of Bitcoin crashed and fell below $3500 when it was around $20,000 in December 2017.

However, the crypto picked up its price and rose above $69,000 one of the all-time highs by November 2021. Within a year this price dropped by 75%.

Other factors that can affect the crypto price

We discussed some of the internal and macroeconomic factors that can affect the price of crypto. Now let us look at what we have not discussed.

The regular design made by the government and related bodies can also affect the crypto prices. The decision by the SEC and other financial enforcement bodies can have a severe impact on the whole crypto market.

If a major government or related financial enforcement entity puts a ban or a restriction on crypto, it can result in a significant crash in the market.

When the price of the cryptos keeps on dramatically falling, it can lead to more and more investors withdrawing the funds which can make the fall severe.

The crash of an exchange or a coin can affect the related crypto coins, tokens, and platforms as well. Let us look at the FTX collapse to understand more about this.

The fall of the crypto giant FTX took place in 2022. However, FTX was not the only platform that was affected by this.

It also pushed down the cryptos in which FTX had huge investments like Solana. The fall of an exchange or coin may also affect the firms and partners that it had business with.

The Bottom Line

No one can predict a crypto crash. You should be aware of all the risks of crypto before you make an investment.

After investing, rather than keeping your crypto in the exchange itself you can move it to a separate crypto wallet.

The price of the crypto may have a huge fall and it can also recover. However, there is no way to forecast the exact time period within which the recovery will

Jay Dawson

Jay Dawson, a cryptocurrency expert based in Dallas, TX, is passionate about sharing knowledge on Bitcoin and other cryptocurrencies, ensuring traders stay updated with the latest trends. His goal is to empower others with valuable insights into the dynamic crypto market.

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