The Crypto Market Crash. Is There A Need To Panic?

Reasons For Crypto Market Crash

Investing in crypto-assets can be pretty beneficial, but many factors such as inflation, interest rates, and other macroeconomic variables affect the price of virtual currencies.

Let’s take a closer look at a few of these factors —

Inflation, the interest rate hikes by the United States Federal Reserve, and the crisis in Ukraine have pushed up oil costs. Such scenarios impact the market confidence, which has expanded to crypto.

Influencer-induced volatility, crypto fans may tweet to encourage people to invest in a particular cryptocurrency. Elon Musk’s comments, for example, had a significant influence on market mood. Dogecoin’s price soared due to his tweets, which resulted in an influx of investors. Along with that, Tesla’s decision to stop accepting bitcoin payments also resulted in a dip in bitcoin price.

Cryptocurrency regulations, the crypto or bitcoin mining restriction enforced by China, is a great example, driving miners to transfer to more miner-friendly states. Due to this, the network hash rate also decreased significantly. 

Negative flows, As per research, many crypto investors are quitting the well-known cryptocurrencies. More than $100 million of Bitcoin has been traded in the last few weeks. The situation is worse for Ethereum, which has seen more than $150 million in withdrawals, accounting for more than 1.2 percent of the assets controlled by Ethereum.

Is The Crypto Market The Only One To See The Decline?

It is evident that the US stock markets continue to fluctuate with the Dow Jones Industrial Average dropping more than 1,100 points. The S&P 500 closed down 4%, its worst drop since June 2020, while the tech-heavy Nasdaq was down 4.7 percent. So the crypto market is not the only one to experience a downfall. 

How Can Investors Survive The Market Crash?

Even if things may not appear to be going well in the crypto markets, there is no reason to panic. These assets have always been volatile, and similar crashes have occurred in the past. For example, cryptocurrency enthusiasts will recall the 2017 & 2018 crypto market crashes, often known as the Great Crypto Crash. But then the market recovered to all-time highs later. So, investors should keep their money and concentrate on long-term goals. 

However, here are some methods you can follow when cryptocurrency prices crumble:

• You must respond calmly regardless of whether you decide to sell your cryptos or consider a drop as a chance to purchase more. Taking emotional judgments, mainly while trading, rarely yields positive outcomes.
• If you’re not frequently trading, don’t leave your coins on a crypto exchange, and make sure you’re only exchanging 20-30% of your whole portfolio.
• Examine the future and how the fundamental circumstances for crypto could play out. Find out answers to, “Will new rules benefit the cryptocurrency market?” and “What other factors may influence the market?”

Crypto, as an asset class, has shown over time that it can provide excellent results, and the recent collapse has taught us that diversification in crypto investment is critical. So, you can opt to deposit money in a crypto wallet; such services are provided by some best cryptocurrency exchanges. Apart from that, concentrate on low volatile currencies, blue-chip coins, SIPs, and adjust your risk tolerance accordingly.