Why Is Crypto Going Down? What To Expect

The Crypto sector is going through one of its heaviest downturns to this date. Many factors have contributed to this crypto winter, including recent Fed hikes. But a little recovery from the past few weeks has kept hope of the investors alive in this bear market.

This downturn has proved to be this bad due to various factors that were not available in the past such events. Everyone is in the dark, whether it’s the people or organizations. There aren’t any signs for the assets to regain their previous positions. Let’s take a deeper look at this crypto winter and what we should expect from it.

Reasons For This Heavy Crypto Turmoil

This is undoubtedly among the worst scenarios the cryptosphere has ever witnessed. But there’s a reason behind it. The market has gone through crypto winters before, but what’s so special about this. Well, there’s not a single cause, but multiple. Fed rate, recent insolvency events, regulations to name a few, are among the factors that contributed to this.

This Federal Reserve interest rate hike is the greatest in the last 28 years. It escalated the rate by 8.6% in a year. This has increased prices in routing products including groceries, gas and have influenced rents, airfares, and more.

The collapse of Terra LUNA ecosystem came out of syllabus. No one expected that it would fall from the face. Though, many experts had speculated before that algorithmic stablecoins might not be as stable as people think. And TerraUST proved them right. The downfall was so bad that its value went from $18 Billion to some Millions.

Regulations and bans around the globe have also influenced the prices of crypto assets. China has put restrictions on organizations to get involved in crypto activities. They also put a ban on cryptocurrency during June and believe that these assets have a negative impact on the environment.

The Securities and Exchange Commission (SEC), the notorious regulator in the USA, thinks of the cryptosphere as ‘The Wild West,’ where crypto assets are moving around freely without any kind of regulations. The regulator is currently involved in a lawsuit with Ripple Labs where XRP creators are nailing their position to win the case.

The recent insolvency events are talk of the town. They fanned the flames to make this crypto winter colder. Voyager, Three Arrows Capital and Celsius are the organizations that went down the well. All the companies filed for bankruptcy chapters. Coinbase stated in a recent blog post that it will not allow any financing exposure to any firm prone to insolvency. The step was taken following the risk management strategies of the organization.

Apart from this, crypto miners and institutional investors selling off their assets also added fuel to this fire. Basically, this sell-off is resulting in digital assets getting piled up in exchanges, and investors showing no interest in accumulating them.

Which Industries Were Affected By The Crypto Winter?

Institutional investors and hedge funds were heavily affected in this event. The downsurge eventually led the investment to fall heavily, which has raised a concern regarding holding the assets. If it goes up, then they have to wait for the price to reach the level when they accumulated it, if not, then it can lead to a bigger hole in the portfolio.

Meanwhile, the NFT and gaming industries appeared immune to this storm. As per the reports, while others went down about 26%, gaming sector witnessed just 5% downfall. Splinterlands remained top play-to-earn game with 350,000 daily active users on the platform. Axie Infinity, Upland, Farmer World and Alien Worlds remained the rest in the top 5 list of games in this crypto winter. Axie was the most searched game among the users.

How Can You Manage Risks To Avoid Damage In Cryptosphere?

Sure this turbulence in the crypto market has influenced a lot of investors, but they can take lessons from the event to make things work in the future. Making limited investments is basically the best strategy to avoid heavy losses. Don’t wear what you can’t bear.

Limit orders are also helpful in avoiding losses. Using them will set a specific limit for the investors and won’t cross the line which can lead to financial damages. Apart from this, a thorough research will help you analyze what’s happening in the market and in making decisions regarding investments. Also, investors must try to invest in assets that are trustworthy, and are usually accepted by the majority in the community.

How To Stay Calm During Such Situations?

Scenarios like crypto winter have the potential to even shake the people with a stronger mindset. When funds flow like a stream of river without offering anything in return, it will naturally make the investors panic. But what happened, happened. We are not into a Black Hole where time and space exchange roles. You cannot travel to the past or future.

Yes it is easy for me to say, but panic does not help. All you can do is accept the fact that it is gone. Take lessons and move. And we all know how volatile this cryptocurrency market is. The point is, the investor should stay patient and just let it flow. And who knows what sorcery this sector may show. I am not saying that the lost funds will return, but neither am I denying the fact that there can be a rebound. Bitcoin is the best example of such volatility.

What Are The Chances Of Recovery?

There are many possibilities, so we can’t exactl;y say when this market will recover. But the space has witnessed minor positive corrections during past days, which indicates that the sleeping beast is trying to wake.

Another interesting fact that raises some hope is the further development in space. Especially the metaverse and NFT sector alongside the gaming industry are actively engaging in developmental activities that involve cryptocurrencies. This might become a reason to deliver warmth to weaken the crypto winter.

What Should You Expect For The Future?

This crypto winter is unlike the previous ones. There are multiple factors that weren’t present before. This includes the LUNA ecosystem collapse, recent insolvency events linked to 3AC, Voyager and Celsius, and more. They have affected the sector badly and investors should hold tight in case there’s more turbulence waiting ahead for this crypto plane.

Crypto Market Condition

The cryptocurrency market had a total market cap of $1.04 Trillion at the time of publishing. Minor correction can be witnessed during the last 7 days, showing a gradual recovery in the market.