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Crypto Crash 2022: The 3 Factors Behind It

Whether you have spent or not, there are a number of things to understand more about the most recent crypto crash.

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Cryptocurrency has been using a crazy ride. After beginning the year reaching shocking new highs and shattering documents, it is currently plummeting just as speedily. For investors that are new to crypto or are thinking about purchasing, this abrupt crash might be nerve-wracking.

Whether you are considering purchasing, have invested, or are just interested in what is happening with cryptocurrency, there are a couple of things to understand more about the most recent crash.

1. What caused the crypto crash?

The crypto crash seemed to come from nowhere, however, there were a few factors that led up to it. For starters, Tesla CEO Elon Musk announced that the organization was suspending its acceptance of Bitcoin for a form of payment as a result of concerns over its impact on the environment.

In order for Bitcoin to succeed over the long term, it needs widespread adoption from retailers. When Tesla declared earlier this year that it would begin accepting Bitcoin, crypto fans were excited that this may mean different companies would follow suit. Now that Tesla has backtracked, many investors are concerned that Bitcoin will have a harder time gaining acceptance -- especially considering Musk has been one of Bitcoin's most prominent fans.

Around the same period as Tesla's announcement, China started breaking down on cryptocurrency as well. While China has discouraged crypto for decades, it recently demonstrated that it was imposing heavier penalties for Bitcoin mining -- the procedure for producing fresh Bitcoin tokens. Bitcoin mining has been focused in China, and the nation's crackdown could affect the global crypto marketplace.

2. Is this unusual for crypto?

While the present crypto crash may be unsettling, it is nothing that cryptocurrencies haven't experienced before. In fact, even the biggest names in crypto, Bitcoin and Ethereum, have taken tumbles much worse than the current recession. The cost of Bitcoin has plummeted by roughly 80 percent in the past, and Ethereum once dropped more than 90% of its value over the course of a year.

Cryptocurrency is among the very volatile types of investments out there, so plunges like those should not be overly sudden. Many experts also believe crypto has been overvalued, therefore it was merely a matter of time until the bubble burst.

3. Is it likely to recover?

Despite their dramatic downturns, the significant cryptocurrencies have recovered from their slumps. The two Bitcoin and Ethereum went on to see their costs increase exponentially after losing 80 percent and 90 percent of the worth, respectively.

Even considering that the current downturn, Bitcoin's cost is up more than 300% within the past year. And Ethereum is up by a shocking 1,150% at precisely the same time period.

Crypto is still a highly risky investment, and it might or might not succeed over time. Therefore, if you are thinking about investing, remember that there's always a possibility that crypto won't have the ability to bounce back again.

Cryptocurrency is a high-risk investment, and it is proven yet again that it is no stranger to volatility. If you are considering buying, right now may be a good opportunity because prices are lower. Just make sure to know what you are getting into because, whilst crypto can be lucrative, it is not the ideal investment for everybody.


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