The 4 Reasons to Explain Why Is Crypto Crashing?

The 4 reasons to explain why is Crypto crashing?

The leading Cryptocurrency Bitcoin reached its all time high of $69,000 in November of 2021 and ever since then it has been a fairly sorry sight. With the price declining 70% since November it is safe to say Bitcoin & the whole Crypto market is now in a bear market. But why is Crypto down? 

Today we will cover the 4 reasons Crypto has been taking a tumble.

Interest Rate Hikes

Ever since the Federal Reserve's inflation report in May and the 0.75% interest rate hike both the Crypto and the Stock market have been struggling to gain any upwards momentum. Pair this with other macro economic events such as the still moving war in Ukraine and the struggling housing market this creates the perfect environment for Stock and Crypto a like to struggle in.

So with inflation hitting a 40 year high how low will Bitcoin go?

During the 2017 run and the following bear market the Crypto market had a clear decoupling from the Stock market however we are now seeing a relationship between the two and seeing them both follow the same patterns. This tells us that the Crypto market is now reacting to macroeconomics more and will continue to do so. 

The fall of 3AC

Three Arrow Capital is a Crypto hedge fund created in 2012 by Su Zhu and Kyle Davies. The fund was managing Crypto assets with a value of over $3 Billion dollars, that’s right billion with a B.

Even large hedge funds can’t escape the bear market and the terrible trading conditions. With over $400 million dollars worth of liquidations 3AC is now facing insolvency and other legal issues. With large holdings in LUNA it is said that 3AC had $200 million dollars turn to nearly nothing when the price of LUNA and the entire TERRA ecosystem collapsed within a week. This caused mass liquidations driving the price down and also pulling the rest of the Crypto market down with it.

To top things off 3AC took out a loan from the Crypto broker Voyager worth $665 million. Voyager has since issued a notice of default since 3AC failed to pay back the loan. This has put the hedge fund in a huge amount of trouble and debt. 

But how is this affecting the Crypto market?

With a hedge fund that big and taking those sorts of losses from LUNA it drains liquidity from the market and drags it down with it. The market has seemed to have priced these events in now however we can not know that for sure.

The collapse of Terra Luna

This is one of the bigger reasons that Crypto is down. LUNA experienced a crash of 99.9% in may which caused a huge amount of liquidations and losses and a server market dump all across the board. Terra Lunas stablecoin UST also depegged from $1.

So what happened to Terra Luna?

The LUNA crash was caused by its link to the stablecoin UST which is the stablecoin for the Terra Luna ecosystem. As a large amount of UST was dumped on the market it caused UST to slightly lose its peg, this caused mass panic causing a huge amount of UST to be sold off which resulted in the depegging and crash of UST.

Since UST is linked to LUNA so heavily this also caused a domino effect and crashed the LUNA price 99.9%. Both LUNA and UST were top 10 coins by market cap. So the market essentially lost two of its top 10 coins within a day or two.

What happened next?

After the crash, multiple well known exchanges such as Binance removed the LUNA and UST listings and Coinbase pulled its LUNA listings which were supposed to go live just a few weeks later. Do Kwon the founder of LUNA tried to make a recovery by launching LUNA 2.0 which quickly crashed the day of launch. It is yet to recover and many think it never will.

Now you might be wondering how this is linked to the broader market and why is crypto crashing because of these events?

The Luna foundation and Do Kwon purchased $3 billion worth of Bitcoin partially linking the success of LUNA to the broader crypto market. A huge chunk of these holdings were sold off by Do Kwon to try and repeg the UST price causing a larger sell off and a ripple effect across the crypto market causing Bitcoin to drop below $30,000.

This whole situation has caused a lot of protocols to rethink how they are pegging their stablecoins to the dollar and has even caused some minor depegs in other stablecoins such as Justin Trons USDD, this has since recovered from its very brief depeg.

Celsius

The last and latest of events that may answer your question of why is crypto crashing. The fall of Celcius.

Celsius network is a crypto loan platform with over $8 billion in lendings and $12 billion worth of assets under management. Everything was running smoothly until the platform made a surprise announcement that it would be halting withdrawals. This caused a lot of panic and pushed the price of Bitcoin below $20,000 for the first time in over a year.

Celsius was founded in 2017 by Alex Mashinsky and S. Daniel Leon however is now rumored to be facing insolvency following the sudden freeze on withdrawals. This has also raised a lot of concerns and questions regarding the management of the company and how they are operating.

So why is Crypto crashing?

Hopefully the above 4 reasons have given you somewhat of an image of why crypto is down and has helped you understand the current market conditions a bit more. All 4 of these events are known as black swan events and having all four happen within a month is just bad luck, it’s also why crypto is crypto. The wild west as some people say. Be sure to check out the rest of our articles to learn more about crypto and the current market conditions.

The 4 reasons to explain why is Crypto crashing?

The leading Cryptocurrency Bitcoin reached its all time high of $69,000 in November of 2021 and ever since then it has been a fairly sorry sight. With the price declining 70% since November it is safe to say Bitcoin & the whole Crypto market is now in a bear market. But why is Crypto down? 

Today we will cover the 4 reasons Crypto has been taking a tumble.

Interest Rate Hikes

Ever since the Federal Reserve's inflation report in May and the 0.75% interest rate hike both the Crypto and the Stock market have been struggling to gain any upwards momentum. Pair this with other macro economic events such as the still moving war in Ukraine and the struggling housing market this creates the perfect environment for Stock and Crypto a like to struggle in.

So with inflation hitting a 40 year high how low will Bitcoin go?

During the 2017 run and the following bear market the Crypto market had a clear decoupling from the Stock market however we are now seeing a relationship between the two and seeing them both follow the same patterns. This tells us that the Crypto market is now reacting to macroeconomics more and will continue to do so. 

The fall of 3AC

Three Arrow Capital is a Crypto hedge fund created in 2012 by Su Zhu and Kyle Davies. The fund was managing Crypto assets with a value of over $3 Billion dollars, that’s right billion with a B.

Even large hedge funds can’t escape the bear market and the terrible trading conditions. With over $400 million dollars worth of liquidations 3AC is now facing insolvency and other legal issues. With large holdings in LUNA it is said that 3AC had $200 million dollars turn to nearly nothing when the price of LUNA and the entire TERRA ecosystem collapsed within a week. This caused mass liquidations driving the price down and also pulling the rest of the Crypto market down with it.

To top things off 3AC took out a loan from the Crypto broker Voyager worth $665 million. Voyager has since issued a notice of default since 3AC failed to pay back the loan. This has put the hedge fund in a huge amount of trouble and debt. 

But how is this affecting the Crypto market?

With a hedge fund that big and taking those sorts of losses from LUNA it drains liquidity from the market and drags it down with it. The market has seemed to have priced these events in now however we can not know that for sure.

The collapse of Terra Luna

This is one of the bigger reasons that Crypto is down. LUNA experienced a crash of 99.9% in may which caused a huge amount of liquidations and losses and a server market dump all across the board. Terra Lunas stablecoin UST also depegged from $1.

So what happened to Terra Luna?

The LUNA crash was caused by its link to the stablecoin UST which is the stablecoin for the Terra Luna ecosystem. As a large amount of UST was dumped on the market it caused UST to slightly lose its peg, this caused mass panic causing a huge amount of UST to be sold off which resulted in the depegging and crash of UST.

Since UST is linked to LUNA so heavily this also caused a domino effect and crashed the LUNA price 99.9%. Both LUNA and UST were top 10 coins by market cap. So the market essentially lost two of its top 10 coins within a day or two.

What happened next?

After the crash, multiple well known exchanges such as Binance removed the LUNA and UST listings and Coinbase pulled its LUNA listings which were supposed to go live just a few weeks later. Do Kwon the founder of LUNA tried to make a recovery by launching LUNA 2.0 which quickly crashed the day of launch. It is yet to recover and many think it never will.

Now you might be wondering how this is linked to the broader market and why is crypto crashing because of these events?

The Luna foundation and Do Kwon purchased $3 billion worth of Bitcoin partially linking the success of LUNA to the broader crypto market. A huge chunk of these holdings were sold off by Do Kwon to try and repeg the UST price causing a larger sell off and a ripple effect across the crypto market causing Bitcoin to drop below $30,000.

This whole situation has caused a lot of protocols to rethink how they are pegging their stablecoins to the dollar and has even caused some minor depegs in other stablecoins such as Justin Trons USDD, this has since recovered from its very brief depeg.

Celsius

The last and latest of events that may answer your question of why is crypto crashing. The fall of Celcius.

Celsius network is a crypto loan platform with over $8 billion in lendings and $12 billion worth of assets under management. Everything was running smoothly until the platform made a surprise announcement that it would be halting withdrawals. This caused a lot of panic and pushed the price of Bitcoin below $20,000 for the first time in over a year.

Celsius was founded in 2017 by Alex Mashinsky and S. Daniel Leon however is now rumored to be facing insolvency following the sudden freeze on withdrawals. This has also raised a lot of concerns and questions regarding the management of the company and how they are operating.

So why is Crypto crashing?

Hopefully the above 4 reasons have given you somewhat of an image of why crypto is down and has helped you understand the current market conditions a bit more. All 4 of these events are known as black swan events and having all four happen within a month is just bad luck, it’s also why crypto is crypto. The wild west as some people say. Be sure to check out the rest of our articles to learn more about crypto and the current market conditions.

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