Cryptocurrencies, which have been among the most discussed investment tools since the first day, are going through one of the most shaky periods in their history. All cryptocurrencies in the market, especially Bitcoin, are experiencing an unprecedented ‘collapse’. It is not possible to predict when the decline will end. So what happened to the markets? Let’s take a closer look at the latest situation in the crypto money markets, the events, the details and the forecasts for the future.
As a matter of fact, Bitcoin is still at a fairly high level. According to the data we received from Coinmarketcap, the cryptocurrency is hovering above $ 28 thousand as of now. After all, you cannot buy any other investment instrument as a unit at such a high price today. However, when we look at the big picture, that is, the long-term situation, we can see that the decline in Bitcoin is not at an inedible level. Let’s take a look at what kind of picture Bitcoin has been painting since 2021.
We were discussing $70,000 for Bitcoin in November 2021
*Bitcoin price chart. Source: Coinmarketcap
Bitcoin was trading at $29,000 on the last day of 2020. 2021 was quite active for the markets. In fact, when we came to November 2021, we started talking about 70 thousand dollars. But now the situation is reversed. As of the date and time this article was written, Bitcoin is trading at $28,350. In other words, a person who bought 1 Bitcoin on December 31, 2020, first increased his money by 2.4 times, and then lost this money. In fact, as of now, this ‘fictitious investor’ has made a loss. Of course, this was true of all altcoins. So how did things turn around when everything was going well?
In fact, the arrival of Thursday was evident from Wednesday
The COVID-19 epidemic has affected the whole world economically. The downsizing due to the curfews, the loss of businesses and their closure, the disruptions in their supply chains… All these put the governments in trouble. Even the ‘super power’ USA announced record inflation in this process. It was not possible for everything to go smoothly in the crypto money markets when there were such large-scale problems in the global sense. Yes, Bitcoin’s decentralized nature was not affected by the pandemic, inflation figures and crises, but it was the people who were affected by these who determined the markets. So actually the arrival of Thursday was evident from Wednesday…
Governments announced support packages for their citizens at the beginning of COVID-19. Many analysts attributed the rise in the cryptocurrency markets to this first. The prevailing view was that the support people got when they had money in their pockets flowed to cryptocurrencies. This was a guess that sounded plausible at first glance, as the total size of money in the cryptocurrency markets had reached $3 trillion by the end of 2021. So money was pouring into the market, flowing into Bitcoin and all other cryptocurrencies.
The issue of safe haven and rising interests
Cryptocurrencies have been considered ‘risky’ by analysts since the first days of their launch. The biggest reason for this is that cryptocurrencies are not connected to any center. In addition, the status of any country’s currency is not important for cryptocurrencies. This situation has always frightened investors. So much so that many people described cryptocurrencies as “untrustworthy”. Investing in tech currencies was insane to many economists when there were traditional, ‘safe haven’ investment vehicles such as gold, silver and even oil. As such, especially small and medium-sized investors who invested in the crypto money markets were waiting for an opportunity to escape. The decision to increase the interest rates of the countries was seen as a sufficient opportunity for the money to be withdrawn by the investors looking for a safe haven and therefore to devalue Bitcoin. But that wasn’t the only reason.
Whale hits and scams
The uncontrolled and decentralized structures of crypto money markets have whetted the appetite of large investors, who are called “whales” the most. So much so that the whales, which have existed since the first day of cryptocurrencies, can play with the ‘settings’ of the markets as they wish. The whales, which sometimes put pressure on selling and sometimes buying, annoyed small investors with their surprise moves, so to speak. In fact, if you look at the social media accounts that share about cryptocurrencies today, you can see that this situation discourages even crypto phenomena. Of course, there is also the fraud dimension. With the spread of cryptocurrencies, there have been numerous hijacking events. Sometimes, we witnessed that the stock markets were destroyed by the money they collected from the investors. These two reasons have opened Bitcoin, whose reliability has already been questioned, to the discussion.
Meanwhile, the negative news spread by traditional finance advocates to the markets should not be overlooked. To them, both Bitcoin and other cryptocurrencies were scams. Basically, that wasn’t true because most cryptocurrencies had a specific project behind them. However, rumors that the digital financial system will overtake the traditional financial system and a new world order will be established have caused negative news to be constantly pumped. While these were happening, small investors were turning to ‘safe havens’ either because they lost their money or couldn’t handle the stress. This meant a decline for Bitcoin…
The markets that fluctuated since the beginning of 2022 almost collapsed with the Terra (LUNA) and TerraUSD (UST) crisis
*UST price chart. Source: Coinmarketcap
Everything we’ve talked about so far has been about Bitcoin and other cryptocurrencies entering a downtrend. Bitcoin, which entered the year 2022 at the level of 47 thousand dollars, fell swayingly with one-and-a-half movements. While small and medium-sized investors and many crypto money phenomena were waiting for this decline process to end, an event that no one expected happened. TerraUSD (UST), a stablecoin indexed to the dollar, allegedly fell victim to an ‘operation’. The price of UST, which should always be close to $ 1, fell to the level of $ 0.2 the other day. The depreciation of even a dollar-denominated cryptocurrency was another factor that triggered the “collapse” of the markets. Right here, there is another point that millions of investors miss:
There are many different stable coins in the market. For example Tether (USDT) and USD Coin (USD). The projects behind these cryptocurrencies hold direct dollar reserves to keep the cryptocurrencies stable. This means exactly real security for the constant value. In UST, the situation is different. The team behind this cryptocurrency also supports LUNA, an altcoin on the Terra network. So LUNA and UST are brothers and they work together. In order to keep the UST around $1, LUNA was traded, sometimes burned, with a certain algorithm. This is exactly why the events are described as “operation”. The “undermining”, so to speak, algorithm of keeping the UST at $1 turned things upside down for Terra. The fact that the team behind LUNA and UST sold Bitcoin, the investor’s panic, and the negative statements from names such as the US Treasury Secretary brought Terra first and then the whole market to the point where it is today…
What awaits the investor?
The question everyone is wondering right now is what or what awaits the market in the future. At this point, we can say that there is no concrete information. When we take a look at the statements made by crypto money phenomena, we see that there is a difference of opinion. While some think that the markets will recover, others say that the downtrend will deepen and these are good days. According to some, both Bitcoin and other cryptocurrencies offer the best buying opportunity in history and this opportunity should not be missed. We will watch and see together what will happen in these conditions where technical analysis and forecasts are reversed…
This content is not an investment advice…
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