The price of Bitcoin dipped below $30,000 in May 2022 after having its peak at around $65,000. This Bitcoin crash incident sparked various reactions from crypto investors and the public. Can we trust crypto investments? Will Bitcoin’s price ever go up again? These are the questions many people ask regarding the recent Bitcoin crash.
Why is Bitcoin crashing? Here are some potential reasons for the recent Bitcoin crash:
The Volatility of Bitcoin and Other Cryptocurrencies
The first thing that you need to keep in mind is that Bitcoin and other cryptocurrencies are unstable. It means their price will fluctuate in the market from time to time. So, there will be instances when their price will go sky high, and there will be instances when their price will dip down low.
So, it doesn’t matter if Bitcoin is the biggest cryptocurrency out there. It doesn’t matter how strong the Bitcoin price is today. The Bitcoin price will crash from time to time because of the volatile nature of the cryptocurrency market itself.
The Fall of the Terra (UST) Stablecoin
In the world of cryptocurrency, stablecoins have their own roles. Stablecoins are the cryptocurrencies that have stable values because they have ties with other currencies or commodities. For instance, Terra (UST) is a stablecoin that was supposed to have the stable value of $1 per 1 UST. However, in recent times, the value of this stablecoin dips down to just a few pennies. Of course, this incident caused a sudden change in the crypto market, which led to the Bitcoin price crash.
The fall of Terra (UST) stablecoin is one of the many incidents that might have caused Bitcoin to crash in recent times, as this stablecoin loses its value in such an unprecedented way. It also affected the trust that the investors put on the crypto market, which affected the price dips in the crypto market for other popular cryptocurrencies as well.
Luna Took the Damage on the Fall of Terra
With the sudden fall of Terra, the sister token Luna also took the damage as its price was dipping down low. The downfall of Luna as the sister token of Terra (UST) put the crypto market in worse condition. This is the reason we see many cryptocurrencies having their lowest dip in recent times. Bitcoin is not the only one that has crashed because of the downfall of Terra and Luna. Many other cryptocurrencies also have the same predicaments.
To safeguard the value of both Luna and Terra, the Luna Foundation Guard needed to take action by draining their billions-of-dollars’ worth of Bitcoin and bought close to a billion of dollars of Bitcoin to help stabilize the Bitcoin price value in the crypto market. However, Bitcoin is still struggling to go up in value after dipping down too low because of this crash.
Bitcoin Got the Impact from the Recent Crypto Price Dips
Bitcoin got the impact as the entire crypto market is plummeting in recent times because of the Terra/Luna incident. This is the reason Bitcoin is crashing in the crypto market, and the price dip might continue in the future if the market can’t stabilize itself. Bitcoin, along with Ethereum and other popular cryptocurrencies, are the market leaders. However, their movements in the market will also depend on the movements of other cryptocurrencies.
The ripple effect always applies in the cryptocurrency market. So, Bitcoin won’t be immune to any changes happening in the crypto market, no matter how small. The fall of stablecoins Terra and Luna is one incident that many people didn’t expect. So, this incident created panic among the cryptocurrency investors, which might also create other unforeseen effects in the crypto market. The Bitcoin crash is just the tip of the iceberg.
The Panic Actions of the Crypto Investors
Another thing that might become the reason for the Bitcoin crash in recent times is the panic actions of crypto investors. Many crypto investors sold their crypto assets after knowing that the stablecoins Terra and Luna are having problems in the market. Thus, it created a massive sellout for the crypto assets in the market, plummeting many crypto values at the same time. Bitcoin is the one that took massive damage because of the panic actions of crypto investors.
Bitcoin is the leading and most popular cryptocurrency in the world, so cryptocurrency investors have invested in Bitcoin as part of their investment portfolio. However, with the recent price dips for many crypto assets, many Bitcoin investors panicked, and they sold their Bitcoin assets hoping to cut their losses. The panic actions of crypto investors created even worse conditions in the crypto market today, where prices are becoming quite unpredictable even more than before, which can lead to even more Bitcoin crashes.
These are the potential reasons for the Bitcoin crashing in recent times. The overall crypto trading volumes are increasing day by day, as cryptocurrency is becoming the most favorable investment for more people around the world. However, with the volatility of the Bitcoin market, we can’t predict how the market will perform in the future. Bitcoin crash is quite a common occurrence in the crypto market, and this cryptocurrency has been experiencing the worst crash yet in May 2022. Crypto investors need to be aware of this problem when they decide to put their massive investments on Bitcoin and other crypto assets.