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Home » Three grim reasons why Bitcoin crashed and one incredible reason why it will recover
Cryptocurrency

Three grim reasons why Bitcoin crashed and one incredible reason why it will recover

Max RokatanskyBy Max Rokatansky12.05.2022
Will Bitcoin price recover?
Will Bitcoin price recover?

Bitcoin crashed to its lowest point since December 2020. Its volatility has never scared investors more than it does today. Will Bitcoin price recover in the near future?

The bear Bitcoin market has come and is here to stay for a while.

The market’s fate doesn’t look to settle anytime soon as the bears are all geared up. They dragged the global crypto market down by almost 20% over the past day. The overall trading volume reached $1.14 trillion and has left the market to bleed.

Bitcoin fell below $27,000 briefly and is traded at $28,000, at the time of writing. Last time we saw such was more than a year ago.

Experienced bitcoiners are rather calm and quiet. They are pretty sure that whatever happens Bitcoin price is going to recover. And strive for new records. As it always does. They like to quote an anonymous trader who once said “when in doubt zoom out”, which basically means that Bitcoin is always to recover despite any obstacles.

But less experienced investors are mortified by things they see today.

Bitcoin was supposed to become an ultimate weapon against inflation and uncertainty. And now it is falling down swiftly washing away the investments that were made actually trying to avoid exactly this kind of disaster.

Why is it falling and how soon will Bitcoin recover?

Three reasons why Bitcoin is falling

It is quite easy to point to obvious reason of the Bitcoin crash such as global economic uncertainty, Russian invasion to Ukraine and the phantom menace of the World War III. But still, there are at least three rather tangible factors that affect Bitcoin’s destiny. And will influence the ability of Bitcoin to recover.

US Inflation hit the crypto market and it still prevents Bitcoin to recover

Yesterday, before the CPI data was out, Bitcoin was hovering between $30,000 and $31,000. But once the CPI reports were out which saw an increased inflation rate than expected, the flagship currency saw a drop below $28,000 within the minutes. This increased inflation will see the Federal Reserve hiking interest rates even more.

Negative Stock Market Reaction which Bitcoin unfortunately followed

The US inflation rise had a drastic effect on the stock market as well as the S&P 500 dropped by 1.7% while Nasdaq Composite rolled down over 3%.

It’s a known fact that Bitcoin is closely related with the US stock market. Quite a sad fact, because this is not what cryptocurrency was born for. But still.

The losses that stock markets saw was knocked on Bitcoin price, increasing the sell-off pressure on Bitcoin.

Investors wanted to cash out. Gold is growing slightly which also tells a lot.

Terra’s UST crash absolutely destroyed trust in crypto

The coordinated attack on UST token almost destroyed it, with prices dropping by 85% and the sister token LUNA going down simultaneously (almost by 95%).

It had a huge impact on investors confidence in crypto, to say the least. Terra’s parent company famously used Bitcoin as the tool to stabilize the UST peg to US Dollar. That was a weird idea from the very beginning, and now it seems absolutely insane. As it turns out somebody could just crash the UST peg simply buying in and buying the token out.

Of course, there is no direct connection between Terra’s tokens and Bitcoin, but the whole story has grown into a such a scandal that other cryptocurrencies simply could not avoid the hit.

Bitcoin, being the most prominent thing in the crypto world, has suffered less than numerous altcoins that are dropping in agony. But still it is a powerful kick. And Bitcoin needs time to recover from it.

Why will Bitcoin definitely recover?

Well, it’s easy to mention “when in doubt zoom out” once again and says all those things about the imminent crypto revolution.

But it the other thing that matters much more and evidently makes all hopes for Bitcoin to recover rather real.

Way too many investors used to see crypto as a safe heaven to keep money away from the general volatility and uncertainty. And it happened so that cryptocurrencies have imperceptibly turned into just one more financial instrument that is highly dependent on the same factors that influence stock market.

So now, after the current crypto crash many investors will be scarred off. And will go someplace else to look for the ways to preserve their wealth. Bitcoin will be left with the majority of users who genuinely believe in crypto and its role into society.

The narrative will be changed. Bitcoin will not be seen as a hedge against inflation, which it obviously is not and was never supposed to be.

We will see the disconnect between Bitcoin and overall market trends and macro factors. That would be a great way for Bitcoin to recover and gradually gain momentum again.

The question remain whether altcoins could follow Bitcoin on this path. Or will they remain just toys for crypto traders while Bitcoin will continue its long walk to a broad adaptation.

Sources: Coinpedia, CNBC YouTube Channel

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Next Article What happened to Terra and Luna and why it is the biggest crash in crypto ever
Max Rokatansky
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Staff writer at cryptolife.report. Max has been covering the tech industry for many years. He believes that crypto is the only thing that can save modern civilization from a slow decline. Decentralized finance is just the beginning. We are at dawn of the stunning new world of decentralized media and direct democracy. No proxies! Be the change you wish to see in the world.


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