A cryptocurrency crash isn’t surprising news to anyone who has been following the industry. After all, 2017 was an especially rough year for crypto prices across the board. 2017 had massive drops occurring on almost a daily basis over the last few months of the year. There are plenty of reasons for why this happened and why it’s likely that crypto will continue to experience volatility in 2018. This article will focus on five of the most probable explanations on why crypto crashed and what you can do about it.
What is Crypto Crash?
Crypto prices have always been a fragile element due to the interest rates, inflation and other factors. With rise in the interest rates, savings becomes more valuable and attractive. Many people feel comfortable to invest if getting high interest rates.
Consider someone invested when getting high interest rates and then the market falls causing the prices to fall. This causes a pressure in the market making many investors to free up their funds to meet other obligations. The same scenario applied in the crypto market causes the crypto crash to happen.
Another most seen reason of crypto crashing is actions taken by the government regulators. For example, Indian authorities implemented strict measures on cryptocurrencies. They also banned all unregulated trading of cryptocurrencies with fiat currencies. That caused Bitcoin price to drop as much as $4,500 from its trading value before the ban was announced on Nov 26th 2018.
Finally, it seems that there are many reasons for why crypto crashes which I will highlight them below.
Crypto is too risky
Cryptocurrencies fall under the high risk but high reward category of investing. The sector is still very speculative now, so investing in it is regarded as being considerably riskier than doing so in standard stocks. Whether cryptocurrencies will ultimately succeed in displacing fiat money is up for debate. It is unknown if it will ever have applications in society. Because of this, the value of digital currency is always changing.
If you’re risk averse or only have a little sum of money to invest, you probably shouldn’t buy cryptocurrencies. You have a far larger danger of losing all your invested money because of the industry’s high level of volatility.
However, if you’re willing to accept the level of risk involved, cryptocurrency may be a good investment. You have to be mentally prepared to afford to lose your money.
Even so, there are a few things to consider before making a purchase.
Lack of liquidity in cryptocurrency markets
The overall liquidity of business sector is the biggest issue the crypto markets experience when utilized financial backers auction a critical lump of their possessions. In opposition to the securities exchange, there isn’t continually a line of energetic buyers prepared to jump on unsold coins. This makes sense of to some extent why crypto crashes every now and again occur on the ends of the week. As time passes and no transactions are happening, prices drop even further as traders panic that the price will continue dropping. decide to get out while they can still make some money. Once all these conditions happen, the crypto crash becomes inevitable.
Developers are losing interest
The show’s organisers conduct an industry survey each year in advance of the actual Game Developers Conference, asking developers from all around the world on what is and could be occurring in the games industry. The results for this year are probably a little more intriguing than in previous years because 2022 appears to be going to be a turbulent year.
As dollar-hungry executives across the industry seem increasingly convinced that there is something of value in the technology. Players (and developers) are afraid of what kind of fresh hells await us over the next few years. This fear is due to the brainworm-driven craze for all things blockchain, cryptocurrency, and NFT.
However, those in charge of creating the games themselves are less enthused. The State Of The Game Industry 2022 poll results were released last week by the Game Developers Conference. In their result, a section on cryptocurrencies and NFTs is noteworthy.
Scams exist
Scammers have always been in sight for stealing your funds. Massive growth of cryptocurrency has also caused many scammers to get opportunity to scam. Crypto scams can also occur because crypto platform is based on block chain. Every block chain has a loop hole!
The blockchain research firm Chainalysis estimated 13 cross-chain bridge assaults in August. More than 10 assaults had resulted in the theft of almost $2 billion in cryptocurrencies in 2022. An assault caused crypto-powered video game Axie Infinity to lose $600 million. $325 million was taken from the Wormhole network in February. Another crypto crash occurred in December, when hackers stole $32 million worth of Bitcoin Cash by breaking into wallets and then transferring them to other wallets they controlled. These attacks prove how vulnerable platforms are when the code controls them. They also show how decentralisation can slow down problem-solving in emergency situations.
A third crypto crash occurred in November when ShapeShift lost around $230,000 worth of tokens. This hack happened through an attack on their employees’ email accounts.