Why is Cryptocurrency Price Falling? What Should You Do?

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The current year, 2022, has not been much profitable to the world of cryptocurrencies and on the contrary, the digital token world has seen more crashes than gains. After months of a Covid-19 wave and an ongoing war, the global cryptocurrency market is seeming to lose its ground, with the same plunging below the $1 trillion mark after January last year. Crypto investors have been on a lower risk appetite and their fear levels have exceeded expectations.

Bitcoin, the world’s largest cryptocurrency, has shed most of its gains to scale an 18-month low by being at the $22,000 levels on Tuesday, June 4. Bitcoin has fallen by over 25 per cent in the past one week. On the other hand, Ethereum, the world’s second most popular cryptocurrency, ahs fallen by over 33 per cent in the past week to dangle at the $1,100 mark.

Why is the Cryptocurrency Market Spiralling?

The cryptocurrency market largely mirrors the global stock markets, and a selloff at the traditional markets on Friday, June 10, led to a contagion effect as crypto began to dip rapidly. “Growing expectations of a sharper Federal Reserve interest rate hike to fight inflation led to an evaporation of investors’ risk appetites across the board, with numerous indices officially entering a bear market,” said the CoinDCX research team. The market sentiment has dipped to a new fear level of 8, the lowest in almost two years.

“Crypto markets have seen a correction due to weak global cues. Internationally, stock and crypto markets have become highly correlated. The inflation rate globally has also been a major concern for investors. In the US, it is at a 40-year high at 8.6% and in the UK at 9%; interest rate hikes across major crypto nations are also a growing concern as they lessen liquidity. Both the indicators have led to a massive sell-off,” Rajagopal Menon, vice president of WazirX, told News18.com.

The ongoing selloff will depend on the Fed’s rate revision announcement. “Most investors will be keenly looking at the U.S. Federal Open Market Committee meeting slated for June 14 and 15th. An interest hike by the Fed is already priced in; however, most investors worry that unless inflation numbers start dropping soon, the Fed will likely have to tighten reigns at a faster pace than anticipated,” observed Darshan Bathija, CEO and co founder of Vauld.

What’s Next for Cryptocurrency Investors

Experts said that cryptocurrency has entered the bear markets at the moment but remained hopeful that the prices would eventually rise. “Corrections like this we had seen in the past years, followed by all times high in prices. Investors who bought at a high price are the ones who are going to panic when prices are dropping to the bottom, but they should remember that we are in the bear market and eventually prices will rise again,” Kumar Gaurav, CEO and founder of Cashaa, told News18.com.

Suman Banerjee, CIO of a Hedenova, US-based Hedge fund said new investors should wait for an anticipated ‘crypto winter’ and invest at that moment to make maximum gains. “I think we will see crypto winter, like what happened between 2017 and 2020. I would advice new investors to wait for that time and play the momentum when Bitcoin prices rise again.”

Gaurav however advised new investors to buy the dip. “Everyone who is interested in crypto but did not invested until now, should do their own research and find out which is the best time for them. Right now they can get Bitcoin or other cryptocurrencies at a discounted price,” he said.

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