Prices of Bitcoin plunged to less than $30,000 as the crypto market crash intensifies in May 2022. High inflation leads to a massive selloff in the market.
Bitcoin Prices Slump 50%
Bitcoin prices are almost 50% below their all-time highs at $67,000, reached in November 2021. It hit a 10-month low at $27,800,255 during trading hours on Thursday, 2022.
High inflation hits global economies with surging commodity prices. Crude prices are trading above $100 per barrel, and inflation zooms to a 4-decade high in the US.
The crypto market saw wild volatility, with investors losing almost half of their investment value. Crypto prices fell on Tuesday as investors rushed to sell their crypto assets. Most crypto investors, who minted profits from the boom in crypto prices in 2021, have lost hugely from the sharp fall in crypto prices. Apart from investors, crypto exchanges like Coinbase face heavy losses too.
Bitcoin, the largest cryptocurrency in terms of market capitalization, dropped to below $30,000 levels as the crypto market faces huge volatility. The crypto market movement correlates with the share market, where investors have lost most of their capital invested in both markets.
Ethereum prices (ETH) trade at $1,960, during trading hours on Thursday, with a drop of more than 59% from the life-high prices in November 2021.
Trading volume in the cryptocurrency exchange Coinbase Global Inc. has come down. The company’s shares fell when its first-quarter revenue was below estimates. Share prices tumbled 84% to $53 from the April 2021 prices, as analysts warn that the second quarter volume may also drop.
Crypto Exchange Unable to Withstand Sharp Fall in Crypto Prices
Coinbase founder Brian Armstrong lost around $10 billion this year from the selloff in digital currencies.
The chief source of income for Coinbase is the income generated from trading. But the bearish sentiment in the crypto market has brought down its prices. Coinbase benefits from high trading volume as its income increases when more buyers and sellers are trading on the exchange. It brings in more monthly users, which generates profits. But with the crash in prices, the number of buyers and sellers on the exchange has come down.
Co-founders of Gemini crypto, Tyler and Cameron Winklevoss, have lost almost $2.2billion of their wealth this year.
Sam Bankman-Fried, CEO of FTX has lost almost $11.3 billion. Binance CEO Changpeng lost more than $96 billion.
Geopolitical Tension Create a Dip in Crypto Prices
There is high geopolitical tension as the Russian invasion of Ukraine continues. It has been more than two months, and the war continues. Talks between the two countries have not materialized positively.
Countries face heavy energy crises with power prices surging higher. Power is essential for mining cryptocurrency, and the shortage of power supply hits the crypto market negatively.
Cash is king, as people prefer hard cash in times of skyrocketing prices and volatility in the currency and crypto markets.
Central banks in the United States, Australia, and the UK have raised interest rates. The Fed’s hawkish approach to handling inflation has led to a hike by 50 basis points, the highest in 20 years. Fears of a global slowdown are on the minds of people. Countries like Sri Lanka and Pakistan are facing economic and political turmoil that keeps investors vigilant about a market crash.
The equity markets are sliding daily. The Fed’s decision to hike interest rates by 50% shows the aggressive policy toward handling high inflation. The crypto market has moved in tandem with the stock markets. There is a high correlation between the S&P 500 and bitcoin prices.
Terra Blockchain’s Luna Falls
Terra blockchain’s native token Luna was the chief loser, losing almost 80% of its value. Shibu Ina lost more than 17%. Bitcoin slumped 10%, and Ethereum lost more than 8%.
Coinbase faces high competition from Blockchain.com and Binance. Uniswap is a decentralized exchange with high volume and is a direct competitor to Coinbase.
Luna slipped with a massive single-day drop of almost 60%. In April, Luna’s prices were at $1.18, and the sharp downslide is another reason for the high volatility in the crypto market. Investors who prefer stablecoins like Luna were disappointed by the huge volatile move in Luna prices. They have lost their stable price values.
UST is another stable coin that has sharply reacted to the crumbling crypto movements.
Investors should wait on the sidelines and look for a reversal before investing in the crypto market again. The Fed hiked interest rates by 50 basis points to curb high inflation. There is more to come in the following months, states Fed chairman Jerome Powell.
Inflation is soaring higher in the UK, the UK, and the Eurozone. The aftermath of the Covid pandemic and the Russian-Ukraine war is the cause of the high inflation.