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Why is the Crypto market crashing ?

It has been a rough few weeks for crypto investors, the months long decline of cryptos like BTC and ETH has been slipping quickly in recent days, with prices falling to their six month lows, wiping out billions of dollars from the market. 

Bitcoin, the largest crypto, lost more than 12% on Friday and fell below $36,000 to its lowest level since July 2021. Since touching its peak in November last year, it has lost almost over 45% of its value. Other digital assets also faced the similar kind of dip, if not more, with Ethereum and meme coins suffered similar drawdowns.

Main reason for the latest slump :

Bitcoin entered 2022 on a high note, with a strong November and early December that paved way for the current downward trend. After starting 2021 in $30,000 range, BTC increased throughout the 2021 and hit its all-time-high when it touched $68,000 on November 10, 2021.

Source : CoinMarketCap

The volatility with the price continues apace with new economic uncertainty over the Omicron Covid-19 variant, new statements from Federal Reserve Chairman on the health of the economy.

Despite slipping back significantly from its peak, many experts still expect BTC to cross $100,000 at some point in the future. Soon after BTC touched its latest all time high, ETH also touched the peak when its price went over $4,800. 

Crypto oriented stocks also saw dip in their price on Friday, with Coinbase losing nearly 16% and falling to its lowest level after going public (as per Bloomberg). MicroStrategy tumbled 18% while the SEC said the company can’t strip out BTC's big swings from the unofficial accounting measures it touts to investors. 

Meanwhile, the Joe Biden administration is preparing to release an initial nationwide strategy for cryptos as soon as next month and federal agencies with assessing the opportunities and risks that they pose. Some of these dips in 2021 have been caused by multiple factors, from craze about the low quality meme coins, to negative remarks from Elon, to Chinas crack down on cryptos. The mix of these factors have caused huge sell-offs in 2021.

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