The cryptocurrency market is facing one of its worst corrections as Bitcoin slumped to $31,000 today and Ethereum to $2,300. The total market cap fell to $1.6 trillion which is at its 10-month low. Fears are looming that BTC might head to $25,000 and wipe away billions of dollars worth of investments. Both Bitcoin and Ethereum are down more than 50% from their all-time highs in 2021. Questions of ‘why is Bitcoin and the crypto market crashing’ are doing the rounds on social media. Today’s crash was a cocktail that was brewing since the start of the year.
Read More: Crypto Crash: Bitcoin & Ethereum Fall Below 50% From All-Time High
Here’s Why Bitcoin & The Crypto Market Is Crashing
- Interest Rate Hike
The Feds raised interest rates by half a percent point last week which led to the stock market crash. The crypto market usually goes in tandem with the stock market and saw a domino effect of slumps. Institutional investors pulled out their holdings which led Bitcoin to crash further. In addition, investors panic sold their holdings to save their investments from going further down. All this led the market to crash and recovery to its previous glory might take much longer than expected.
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- Institutional Interest Cooling Off
The first half of 2021 had a phenomenal bull run and the crypto market was brimming in all its glory. Institutional investors reaped all the rewards and the market saw a dip during the second half of the year. However, it picked up steam between October and November and several top coins reached their all-time highs. However, the same momentum didn’t carry through 2022 and institutional investments are cooling off.
Financial establishments are selling their holdings and there have been crypto fund outflows from institutional investors for close to a month now.
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Chris Kline, the co-founder of Bitcoin IRA, stated that institutions are now considering getting back to the traditional markets as they believe it is much safer than the crypto market. He said to Yahoo Finance that some institutions are “moving their money back to the dollar, as a starting point, and then seeing what they’re going to do from there.”
At press time, Bitcoin was trading at $32,861 and is down 2.62% in the 24-hours day trade. On the other hand, Ethereum is trading at $2,440 and is down 1.27% in the day’s trade.