After a year of gains and record highs, the crypto markets' technical picture in 2022 has taken a much more bearish tint leading to huge panic selloffs to all the major coins spreading negative sentiment in the market, with $2.5B in net realized losses.
Although dips are not alien to the markets, this left many traders with less appetite for bitcoin as many of them felt disappointed when expectations didn't match reality. A perfect storm of bad news and rumors took its toll on the markets leaving BTC pinned under $30K correcting 50% below its ATH. As crypto struggles to give any green indexes, let’s take a closer look at the reasons for this market crash.
3 Reasons Behind Crypto Markets Meltdown
Russian Central Bank to ban cryptocurrency
If you’ve kept up with crypto news for a few years, it would be understandable if you are desensitized to headlines claiming that Russia is banning crypto. But of course, everytime the crypto world hears of such a soon crackdown in the world’s most crypto influential nations, the already spooked community casted a haze of uncertainty over the investing landscape.
Russia is reported will ban crypto mining and trading over money laundering and terror financing fears. Back in 2020, Russia banned the use of bitcoin as a payment method and every now and then releases reports warning about the risks related to crypto.
Not only did this clampdown of the crypto crash the prices, but also will cause a miners' exodus as Russia is the world’s third-largest player in Bitcoin mining behind America and Kazakhstan.
Federal Reserve Might Dial Back its Monetary Policy
Cryptocurrencies have sparked US regulators and lawmakers' interest lately. However, US officials’ stances are in disarray! Although the Biden administration is looking to set up outlines that aim to regulate the cryptocurrency market, this regulatory uncertainty and having the tech provision tax sparked controversy in the crosshairs. But what really sent the markets into a tailspin is the fact that the Fed reserve bank is threatening the markets with hiking interest rates and withdraw stimulus from the markets.
In the wake of this big shift of policy, all the markets, not just crypto, appear to be heading into uncharted waters.
Short-Term Holders' Reactions!
According to Glassnode Insights, as the Bitcoin drawdown deepens, spooked bearish short-term investors have been taking any opportunity to cash out their money.
“Looking at the cross-sections of investors who realised the majority of these losses, we can determine that it is largely the Short-Term Holder (STH) cohort. Coins are considered to be owned by STHs when they are younger than ~155-days, and are statistically more likely to be spent in the face of volatility” the report says.
Liquidating over $2.5 Billion, this marks the market’s largest capitulation since May 2021.
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