It has been a tough start for Bitcoin in 2022. The cryptocurrency has crashed to reach a low of about $35k in some markets from a peak of over $65k in Q4 2021.
What Does This Mean for Investors?
Companies tied to cryptocurrency stocks are reeling from the massive tank, as their shares have plummeted. Top indices tracking the price of Bitcoin have felt the drop too. Still, dumps are normal and expectations in the stock markets have had a hand in this quagmire.
The crash has affected shorting Bitcoin in PrimeXBT. Expectations of a rise in interest rates have had a massive effect on crypto prices, with the stock market also suffering. Investors are dumping highly volatile assets and moving towards stable ones to anticipate the Federal Reserve’s bombshell predicted in March 2022.
Past Crypto Crashes: How Did Bitcoin Recover?
Volatility in Crypto assets is expected, and such crashes in Bitcoin have come before for traders in PrimeXBT. Blockchain technology focusing on the decentralized network is still new, making investors cautious with a slight turn of events.
In 2021, a specific directive in China towards Crypto handlers led to a massive retreat of crypto prices to monthly lows. A follow-through crackdown led to a significant sell-off that hit all the crypto markets worldwide. Further, concerns of the effect of mining digital assets on the environment by big automakers such as Tesla played a significant role in past crashes.
However, in the wake of the massive retreats, Bitcoin has been notorious for rebounds, adjusting prices beyond the traditional assets. The adjustments are because of the confidence investors put on crypto assets and accompanying technologies such as blockchain. In late 2021, PayPal, Visa, and MasterCard released intentions to work with crypto assets in their networks. The COVID-19- fuelled inflation also had something to do with the drive towards crypto investments, people seeing it as a place to protect their wealth.
The backdrop of the move by the Chinese to restrict crypto trading and any form of mining in the mainland pushed other markets to fill the gap. All these factors led to the highest ever-recorded price of a unit of Bitcoin in late 2021 as seen in the PrimeXBT’s trading module.
What Are the Reasons for the January 2022 Bitcoin Crash?
Many events over the past few weeks have piled a lot of pressure on crypto assets, leading to massive selloffs. The European markets are taking a keen interest in misleading adverts that cannot recognize the risk of investing in tradable instruments.
In particular, the government in Spain seeks to muzzle social media influencers pushing the adoption of crypto without stating risks. The UK will also recognize crypto investments as any other investment, pressuring advertisers to recognize the fact in ads and promotions. The UK, Spain, and Italy have set the rules, which will soon come into effect, meaning that trading firms will have to change their advertising strategies—a potential limiter to the adoption of crypto.
The crackdown in Europe might create a ripple effect all over the world, a situation that worries investors. Interference by governments goes against the entire ecosystem of tradable crypto instruments that ride on the blockchain, which is to remove control from governments and central banks and put it in peoples’ hands.
Russia sets to limit the use of Bitcoin within its borders, following China. However, as of now it still stands as a proposal from the financial authorities. The news of an invasion in Ukraine is also sending shivers, further dampening the mood of people preferring highly volatile instruments such as crypto, which tank on mere speculation.
A tumble in shares of companies connected with cryptocurrencies has added to the fears, many investors rushing to sell. Microstrategy is one of those firms, reporting a drop of about 17%.
Will Bitcoin Recover?
Future surges will require confidence, as the past has shown. However, it remains speculative to predict future bullish runs, but the coin will rely on past rallies after a tank to come out of this bearish trend.