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.
Many cryptocurrencies are subject to strong price fluctuations. However, even experienced investors were shocked when bitcoin’s price dropped 29% in a short period of time. The price of Tether, the stablecoin, plummeted, and the Luna cryptocurrency, which was once the most valuable cryptocurrency in the world and traded at $85 per unit, dropped to $0.005 per unit.
Investors are watching a pivotal moment in the financial market, as interest rates have risen amid inflation. Investors are actively avoiding risky assets like cryptocurrency and prefer to invest in more predictable and stable investments.
The cryptocurrency market has had a great year. It seemed like digital assets would soon become more legal after being considered speculative products for so long. Bitcoin and Ethereum, two of the most popular cryptocurrencies worldwide, set records last November. The price of bitcoin rose to $67802 per coin on November 9 and they offered $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 likely due to inflation. Bitcoin and other cryptocurrencies were once viewed as a hedge against inflation. But, reality is quite different. According to investors, rising inflation is forcing the US Federal Reserve raise interest rates faster. This will cause a slowdown of economic growth. Investors eventually get rid risky assets like cryptocurrency.