Why is crypto going down after outperforming projections earlier in the year? This is a question that many analysts and experts are considering at the moment. Bitcoin’s volatility is causing uncertainty in the crypto market that has forced investors into tough decisions with their portfolios.
Why is Crypto Going Down? Will the Slide Continue?
Bitcoin is the face of the cryptocurrency market. And the majority of price movement within the market is dependent on Bitcoin’s success or failure.
For example, most altcoins face volatility when Bitcoin begins to drop. Anything from negative press to government crackdowns can cause a chain reaction that leads to a crypto crash.
At the moment, Bitcoin is trading around $30,000 after hitting an all-time high of $64,829.14 in April of 2021. So, why is crypto going down so quickly after most digital currencies were reaching new highs in recent months?
This is because of recent government crackdowns and backlash that has led to market uncertainty and volatility. And while most experts believe it’s only a matter of time before the crypto market recovers, many investors are trying to determine if now’s the time to get in or get out.
So, let’s take a look at the bigger picture. Bitcoin finished June of 2021 down 6% and the volatility has continued into July. On the other side of the crypto spectrum, the “meme token” Dogecoin is down over 70% in the past two months after hitting an all-time high $0.740796.
According to a CryptoCompare, trading volume on Coinbase, Binance, Bitstamp and Kraken fell more than 40% in June. In fact, these are some of the largest and most popular cryptocurrency exchanges available. And in total, the crypto market lost over $1.3 trillion in a two-week span.
As you can see, the crypto crash has led to massive losses and less trading. Investors are moving away from cypto due to volatility concerns and other factors.
Crypto Crash Breakdown
You may want to know why the crypto crash occurred in the first place. And why is crypto going down at alarming rates at the moment?
This is due to a variety of factors, including public influence, bad press, government pressure and crackdowns.
In May, China banned financial institutions and payment companies from providing crypto-related services. China also shutdown Bitcoin miners throughout its country.
Around the same time, Elon Musk announced Tesla would no longer accept Bitcoin due to climate concerns. Musk intends to resume using Bitcoin for transactions once Bitcoin mining transitions to more sustainable energy.
More recently, the U.S. Federal Reserve has flagged digital assets for the very first time. Its semi-annual Monetary Policy Report to Congress noted that “asset prices may be vulnerable to significant declines should investor risk appetite fall, interest rates rise unexpectedly, or the recovery stall.”
And the risk appetite has fallen. The recovery is stalled. Investors are less willing to take on the risk due to volatility. As a result, crypto trading is rapidly dropping and the market is taking one hit after another.
Investing in Cryptocurrencies
The crypto market is in a difficult period at the moment. But that doesn’t mean it’s time to write-off cryptocurrencies for good. There’s still real investment potential in Bitcoin and many of the best altcoins, such as Ethereum, Tether and Litecoin.
To stay ahead of the latest crypto trends and analysis, sign up for the Manward Financial Digest e-letter below. You can discover the next big token to hit the market with daily updates and insights from the crypto experts at Manward.
Don’t overthink the current narrative surrounding cryptocurrencies. Will the market recover? Are more government sanctions on the way? Why is crypto going down after its rapid rise to start the year? Now is not the time to jeopardize your portfolio. As difficult as it may be, most analysts and experts believe you should hold on and keep a close watch on the crypto market for the time being.
About Corey Mann
Corey Mann is the Content Manager of Investment U. He has more than 10 years of experience as a journalist and content creator. Since 2012, Corey’s work has been featured in major publications such as The Virginian-Pilot, The Washington Post, CNN, MSNBC and more. When Corey isn’t focusing on Investment U, he enjoys traveling with his wife, going to Yankees games and spending time with his family.