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Crypto crash in 2022! Why Bitcoin and Other Altcoins Crashed

 


The crypto courses slumped massively yesterday evening. The entire cryptocurrency market lost more than 7% in value in the past 24 hours. Bitcoin price hit a low of $ 43,000 while other altcoins broke their support levels. Have we now officially entered a crypto bear market? Why do Bitcoin & Co crash like this? Let's look at the exact reasons.


US Federal Reserve

After the US Federal Reserve (FED) released the minutes of previous meetings last night, almost all US technology stocks crashed. The Nasdaq 100 Tech Index lost nearly 2% at the close of trading. With the tech stocks, the crypto stocks also crashed. In addition to Bitcoin, Ethereum, Cardano and Solana also lost ground. Usually even in the double-digit range. It seems like the market is currently evaluating cryptocurrencies as a tech asset.


Why did cryptocurrencies crash so?

Tech stocks tend to be much more aggressive to central bank news than value stocks. Changes in interest rates and inflation in particular tend to weigh on tech stocks. The often indebted companies have to spend more money to pay off their debts when interest rates are higher. When inflation is higher, their future gains are worthless, which is also downside. Even if that's not the case with Bitcoin, the price appears to be correlating with tech stocks, or at least with what the Fed has said. In this very protocol, the central bankers fear a further rise in inflation (more than expected) and at least three rate hikes for 2022. Possibly even a fourth. The end of loose monetary policy.


How will that affect Bitcoin?

The effects on Bitcoin should be manageable. In fact, it is not yet known how Bitcoin will behave when inflation is high. It is possible that high inflation could even boost the Bitcoin price and earn it the reputation of a digital gold. The fact that there will be less liquidity in the market due to higher interest rates should only affect Bitcoin to a limited extent. Especially since interest rates are likely to remain comparatively very low even after the increases.



Overall, most of the inflation and interest rate risks are likely to be factored in by now. Little should stand in the way of a long-term recovery of the Bitcoin price. 

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