The price of bitcoin has been halved by traders who are now avoiding risky investments. As a result, the total capitalization in the cryptocurrency market has dropped to more than $1 Trillion since November last year. The collapse of the digital asset market was caused by investor fears, rising inflation, and the difficult geopolitical environment.
Although strong price fluctuations are common for most cryptocurrencies, it was surprising that bitcoin lost 29% in the span of seven days. The most well-known cryptocurrency in the world, Tether, saw its price fall and Luna, which traded at $85 per token a few days earlier, saw its rate drop to $0.005 per unit.
Investors have been watching the financial markets change lately, as interest rates rise amid rising inflation. Investors are actively avoiding risky assets like cryptocurrency and prefer to invest in more predictable and stable investments.
The last year has been a positive one for cryptocurrency markets. After being considered speculative for a while, it seemed digital assets would be more legitimate. The two most widely used cryptocurrencies, Ethereum and Bitcoin, reached new heights last November. On November 9, bitcoin’s price rose to $67802 per coin and $4,800 for one “ether”. Both cryptocurrencies have experienced a price drop of 58% and 60%, respectively, since their November highs.
Noting that cryptocurrencies fell even before last Wednesday, this was due to inflation. Bitcoin and other cryptocurrency have been used in the past as a way to hedge against inflation. But, reality is quite different. Investors believe that rising inflation will force the US Federal Reserve (US Federal Reserve) to raise interest rates quicker, which will result in a slower economic recovery. Ultimately, investors will get rid risky assets like cryptocurrency.