Crypto market: Why is there a crash and what’s next?

moneycontrol.com:

The cryptocurrency market has endured a face-ripping freefall over the past fortnight. Fear and panic gripped the market as Bitcoin, the world’s first digital currency, tanked below $30,000 twice in a week, its lowest level in 16 months. Other blue-chip cryptos fell, with losses ranging from 30 percent to 90 percent.

There was also a setback for the Terra Protocol and its ecosystem, which were supposed to maintain stability in the crypto market. The UST – the protocol’s algorithmic stablecoin – lost its peg and dropped to about $0.001. Amid the Terra Luna crash, Binance, one of the largest crypto exchanges, delisted the UST-linked $LUNA token. The cryptocurrency fell by over 99 percent.

Here’s a look at the reasons for the crash, whether this is a good time to buy, and what investors can expect from the markets in the future.

Reasons behind the crash

Inflation, the US Federal Reserve raising interest rates, and the war in Ukraine pumping up oil prices have all dampened market sentiment, which spread to crypto as well.

Cryptocurrencies were presented as an asset class separate from the financial markets, untouched by the instabilities of the stock markets. However, the past two weeks have shown that cryptos are not insulated from the broader market sentiment. An estimated $200 billion of investor wealth was wiped out last week.

Strategy for those invested in crypto

For those invested in the crypto markets, there is no need to panic even though things may not look good now. This asset class has always been volatile and such crashes have happened before – in 2021 and in 2017 – and it has bounced back to all-time highs. Investors should hold on to their investments and focus on long-term goals.

Crypto, as an asset class has, over