Crypto Crashing
If you’ve been wondering why crypto is crashing, you’re not alone. It’s a question that plagues investors around the world. The current situation is far from isolated. The cryptocurrency market is suffering from a lack of confidence. Various factors, including inflation and interest rates, affect the confidence of investors and contribute to the price crash. And the government’s actions can also cause a drop in the price of cryptocurrencies. China, for instance, is becoming increasingly aggressive with cryptocurrency. On Sept. 24, 2021, the government in China declared all transactions of cryptocurrencies illegal. Since then, it’s illegal for Chinese people to exchange these cryptocurrencies.
The crash of cryptocurrency prices has been a long time coming, but this recent episode may have triggered a more intense downturn. Some critics have said that this crash is a sign that the market is about to peak and fall. But, the price of cryptocurrencies has always been volatile, so it’s not surprising that this crisis has come at a bad time. In May, Tesla’s CEO, Elon Musk, announced that it would stop accepting Bitcoin as a form of payment. At the same time, China started cracking down on cryptocurrency mining, which drove cryptocurrency prices into the ground. Some believe that the IRS’s revelations on crypto taxes have also contributed to the recent craze.
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Another reason that prompted a drop in the cryptocurrency market was the easing of restrictions in China. Besides the strict banking and financial institutions, the country also warned against the overuse of speculative trading. This news sent the market into a tailspin. It also resulted in a large sell-off, washing out $1.2 billion AUD of positions on exchanges. This prompted the government to enact more stringent regulations and slap restrictions.
Why is Crypto Crashing?
Regulating cryptocurrencies is another issue that affects investors’ confidence in the short-term. Governments are considering stricter regulations for cryptocurrencies and have even banned crypto mining in their own province. The government’s new stance could encourage investors to invest in cryptocurrencies again. But, in the long term, the government’s actions might also lead to a crash. And, the PBOC has banned mining in the province of Sichuan. The move will also affect the price of cryptocurrencies as a whole.
Despite these developments, many crypto holders remain undeterred. A recent news report attributed the market’s drop to a trio of negative factors. While most of these should only have short-term effects, some of these could have a lasting impact on markets. Those who aren’t deterred are likely to see a rise in crypto prices. However, the Russians may have a plan to block any unrest in Ukraine.
One of the reasons for the market’s steep drop is a weighty ban in China on mining. The ban has forced miners to move to a more miner-friendly jurisdiction. This decision has a profound impact on the network’s hash rate, which is the basis for the price of a cryptocurrency. If the government continues to impose sanctions against mining, it will further drive the market to crash. For the time being, the most common reasons for the crash include an increase in the number of investors and the volume of transactions.