What You Need to Know About the Crypto Crash
Cryptocurrency prices have experienced a crypto crash, with alt-coins losing as much as 70% of their value. In mid-June 2022, the S&P 500 will officially enter a bear market, which means that the market will eventually begin to decline. Here’s what you need to know about the recent crypto crash.
Cryptocurrency prices have been hit by a crypto crash
Investing in crypto can be risky, especially when there are so many factors affecting the market. Among these factors are macroeconomic factors, such as rising inflation, which can affect investor confidence and lead them to stay away from riskier assets like cryptocurrencies. Another major factor is the rise in interest rates, which can make people prefer safe and predictable savings accounts over crypto. Lastly, government actions can spook investors and cause them to flee from riskier investments like cryptocurrencies.
The crypto crash is affecting individual investors and companies alike. The S&P 500 plunged almost 8% and the Dow Jones Industrial Average dropped nearly 800 points. The Nasdaq Index tumbled 530 points, or 4.7%. Several firms have already suffered as a result of the crash, including MicroStrategy, which is facing a margin call for more collateral. Also, Coinbase’s CEO Brian Armstrong has reportedly called on unhappy workers to quit the company.
Alt-coins have lost 70% of their value
The crash in crypto markets has wiped out billions of dollars and sent shockwaves through the entire financial system. Bitcoin and Ethereum, the two largest cryptocurrencies, fell below $1,200 and below $20,000, respectively. The value of one Bitcoin has fallen nearly 70 percent since December. Ethereum, the second largest cryptocurrency, has dropped more than 20 percent in the past 24 hours.
The fall in the prices of these cryptocurrencies is caused by a number of factors, including the broader global economic outlook, the specter of a US or European recession, and inflationary pressures. The recent war in Ukraine has also impacted the market. In addition, the US Federal Reserve has indicated its commitment to raising rates, and investors have been pulling out of the market. Meanwhile, reports of heists, scams, and freezing of withdrawals in cryptocurrencies have contributed to the decline in market cap.
Nevertheless, the recovery of the alt-coin market will be slow and painful. It will take a few months until the market rebounds to its previous value. But before that happens, there are some positive signs. First of all, cryptocurrency traders should not be frightened.
The S&P 500 officially entered a bear market in mid-June 2022
On June 13, 2022, the S&P 500 officially entered a bear-market state. At the time, the index was down more than 20% from its high in January 2022. No one knows how much further stocks will fall before they reach their final bottom.
Historically, the S&P 500 has been in bear markets 27 times since 1928. There were twelve bear markets between 1928 and 1945, and 15 in the period from 1945 to 2020. During bear markets, stocks have dropped by an average of 28%. The longest bear market, which ended in March 1942, lasted 61 months and decreased the index by nearly 60%. Bear markets are part of history, but they usually last for just a short time and are much less powerful than bull markets.
The bear market that ended in 2007 was driven by a surge in home prices, which was not sustainable. Many property owners were heavily leveraged. This environment created problems throughout the financial system and led to government intervention. Meanwhile, in February 2020, investors began to understand the implications of the COVID-19 pandemic, which caused short-term jitters in stock prices. However, the effect was short-lived, and those who stayed invested were rewarded.