What is the Crypto Market Crash?
The entire crypto market crash 2021 was not an unexpected event. As the market boomed in 2017-2018, experts saw it coming. Why is the crypto market crashing?
The crypto market crash 2021 happened at a time when investors were pouring in money into the crypto market.
The bullish run that started in September 2017 led to a rise in bitcoin prices, which went from $5,000 to $20,000 within a short period of time. The bull run inflating the price of bitcoin and other cryptocurrencies also brought about a new breed of investors who didn’t have enough knowledge about the crypto market and blockchain technology. These individuals poured in money into risky ICOs (Initial Coin Offerings) and hoping for quick returns. These investors were blinded by greed, and hence they invested in projects that had no future or potential.
A lot of them invested in projects that used a lot of marketing tactics to attract investors, but hardly did anything to back their project up. It was clear that these ICOs would fail as soon as they were launched, so it’s not a surprise that some projects like Bitconnect shut down after collecting millions of dollars from unsuspecting investors. The amount of money being invested into these risky ICOs eventually led to the creation of a bubble which was bound to burst eventually.
Why did this happen?
In 2021, a new recession hit the world of cryptocurrency. The market had grown exponentially for years, and everyone was expecting the price to keep growing like it had been doing. However, bitcoin and other cryptocurrencies started crashing in value. The crash lasted for almost a year and ended up being over 80% before everything finally bottomed out. Why is the crypto market crashing?
On January 2nd, 2021, the cryptocurrency market cap fell from $11.6 billion to $4.8 billion over a period of 48 hours. The cryptocurrency market cap has been steadily increasing over the years, starting from $16.7 billion in 2016 to $250 billion in 2018. But as with any other market or industry, there are always downsides and crashes.
In the first half of 2021, the value of all cryptocurrencies increased by more than 500%. The market cap of the entire sector reached approximately $500 billion. This trend didn’t come out of nowhere. There were many reasons for it. Why is the crypto market crashing? The main one was China’s decision to ban ICOs and prohibit cryptocurrency exchanges from operating within its borders. The second factor was the strong support provided by governments around the world, which legitimized cryptocurrencies and convinced many institutional investors to enter the market.
What do individual investors need to know in this situation?
This is not the first time we have seen a cryptocurrency market crash. In fact, the market has been very volatile for some time now. However, this will not be the last time either. It is important to remember that the market will eventually recover from these falls, and volatility is part of the game–but only if you are prepared for it.
Will this crash affect blockchain and crypto in the future?
Lately, the cryptocurrency market has been experiencing a massive crash. If you don’t know what I’m talking about, or you’re new to cryptocurrencies, please take a look at the image below:
As you can see from the graph above (which shows the market cap of cryptocurrencies as a whole), we’ve experienced an extremely sharp decline in value since just last year. Although it’s hard to tell when exactly this crash started, many analysts trace its beginnings back to June 12th, 2017. On that day, the price of one Bitcoin fell below $2,000 for the first time since November of last year.
Since then, the crypto market has seen a positive reversal and is slowly making its way back to its old highs. While it’s not likely that a collapse like December’s will happen again, we need to understand what caused this abrupt drop, what it means for the future of crypto, and if it has any long-term effect on Bitcoin. If nothing else, this will serve as a guide for anyone hoping to enter the crypto world and avoid common pitfalls.