While why is bitcoin going down , you may be wondering why. A couple of factors might be affecting its downward trend, including unrest in Eastern Europe and supply and demand. But the real reason is much more complex. Let’s look at a few of them and what they mean for the price of Bitcoin.
Why Is Bitcoin Going Down Possible Reasons
There are a number of possible reasons for why is bitcoin going down . One reason is unrest in Eastern Europe, which has caused many countries to shut down the internet. The unrest in Ukraine and the former soviet republic of Belarus began with protests over fuel price hikes. In recent weeks, this unrest has led to sweeping internet shutdowns. As a result, bitcoin’s computing power has fallen by 13% globally.
Rising Gas Prices
A number of protesters took to the streets of Kazakhstan on Sunday, why is bitcoin going down , expressing their outrage over rising gas prices. The protests shut down the internet in the country, compromising the safety of businesses and residents. Bitcoin mining was one of the sectors hit hardest by the internet blackout. The country had become the second largest bitcoin mining center in the world after China clamped down on crypto activities.
Large Supply of Bitcoin
There’s also a large supply of bitcoin, which is the currency’s primary form of payment. Bitcoin hashrate is a measure of how much computing power is used to process transactions. According to Larry Cermak, vice president of research at crypto news site The Block, the internet blackout in Kazakhstan halted crypto mining. why is bitcoin going down . As a result, the price of Bitcoin dropped more than twelve percent on Thursday.
Speculation
Bitcoin’s price has been in a free fall in recent weeks, People ask why is bitcoin going down , but it has bounced back before. True believers, who call themselves Bitcoin maximalists, say that the cryptocurrency will one day break free from its correlation to risk assets. However, that doesn’t mean investors and traders should abandon the currency. There are many factors that will affect its price, including the fact that nobody knows how much it will fall.
First Reason
The first reason is that the US Federal Reserve is raising interest rates. The central bank is trying to prevent inflation. This means that they will hike interest rates in the near future. Investors fear this move will cause asset prices to drop. They may also sell off inflation-hedged assets.
Major Factor in Bitcoin’s Price
Speculation is also a major factor in Bitcoin’s price. People who have invested in the currency might think that it will be worth hundreds of thousands of dollars in the future. Another reason is that other cryptocurrencies are trying to grab market share from Bitcoin. Furthermore, the price of Bitcoin is influenced by media attention and industry rumors. Both of these factors tend to affect Bitcoin in the short term, though their significance is disputed.
Coronavirus Pandemic Effect
Despite the speculative nature of Bitcoin, supporters of the currency see it as a useful addition to balanced portfolios. For example, Bitcoin did worse than stocks at the time of the coronavirus pandemic. why is bitcoin going down in corona virus. The virus caused investors to panic-sell their holdings, which led to a sharp decline in the price of bitcoin. It went down by 40% by March 2020. This is why it is so hard to predict whether a crypto currency will continue to go up and down in the future.
Rising Inflation Rate
A rising inflation rate has also caused investors to dump cryptocurrency assets. The central bank has also raised interest rates, which has pushed investors away from risky assets. During this period, bitcoin bounced around the $40,000 mark and remains below that level. In the spring of 2022, it formed a new trading range around $20 and has been trading around it for several months.
Volatility
A number of factors can contribute to the volatility of bitcoin. Many of these factors are related to regulatory factors and concerns over security. Other factors can be related to perceived value of the asset. Another factor is the presence of “whales,” people who hold large amounts of a particular cryptocurrency. All of these factors can cause volatility within an asset. The Crypto Volatility Index tracks this volatility in both bitcoin and Ether. It is important to note that the volatility of bitcoin is much higher than that of stocks and bonds. In fact, in a recent report, 29% of S&P 500 companies had more volatility than bitcoin. Despite this, some analysts believe that bitcoin is due for a correction.
Trading Strategy
Investors are more likely to buy crypto when prices are low. As they see the potential for gains in the currency, they might also look for ways to increase their holdings. One option is to adopt a trading strategy that uses dollar-cost averaging. This strategy allows you to buy and sell cryptocurrency in a way that will minimize the volatility premium of the asset. why is bitcoin going down . This strategy can be especially useful for less risk-averse investors.
Bitcoin Market
Volatility in the bitcoin market is caused by investors’ differing beliefs about its utility. Many investors believe that Bitcoin will retain its value and grow in value, and they view it as a hedge against inflation. They consider the currency a great alternative to fiat currencies. This belief also helps justify the price volatility of bitcoin.
Reality for Any Currency
Market volatility is a reality for any currency, and it can be scary for users of the digital currency. But it’s crucial to understand that market fluctuations are a natural part of the trading process. The rise and fall of a currency is dependent on the level of trust among its users. This is the basis of true price discovery. If enough people believe that it’s valuable and reliable, it will continue to grow in value and stability.
Supply/Demand
Bitcoin’s price has fallen over twenty percent in the past year. This is largely due to widespread adoption of the cryptocurrency by banks, hedge fund managers, and other companies. While there are many possible reasons why the price has declined, it is likely a temporary reversal of the theory of broader acceptance.
If the Price Falls to Zero
Bitcoin is notoriously volatile, with periods of steep drops. The most recent example of such a fall happened in November 2021. Speculators are eager to invest in the cryptocurrency space, assuming the price will rise. However, these speculators are not going to stay if the price falls to zero.
Global Economic and Political Developments
The supply and demand for Bitcoin is dependent on global economic and political developments or why is bitcoin going down . In fiat currencies, monetary policy often changes in line with political developments. In the bitcoin ecosystem, however, there is no central authority to regulate the monetary base. Rather, the creation of new bitcoins is governed by detailed rules in a strict protocol.
Global Crises
Global crises can also affect the cryptocurrency. The COVID-19 pandemic, for example, caused waves in the crypto industry, with Bitcoin dropping from $9,000 to $5,000 by March 2020. Other cryptocurrencies experienced similar dips. Moreover, the stock market was devastated, and businesses around the world were forced to shut down.
Increasing Interest Rates
Increasing interest rates may also affect the price of cryptocurrencies. The Fed is trying to tame inflation by raising rates, and higher rates will depress demand for risky assets.
Russia’s Crypto Ban
The government of Russia has banned cryptocurrency from its banks and financial institutions citing environmental concerns. However, Russia has been a major contributor to the Bitcoin network, providing over 10% of its computing power. why is bitcoin going down . The government plans to raise the cost of energy for crypto miners. This will deter Russians from buying goods and services in Bitcoin. In addition, the ban will hamper the development of cryptocurrency in the country.
Regulatory Risks
Despite these risks, the price of bitcoin returned to $43,000 on Thursday, with a slight gain of about 3%. Analysts are keeping an eye on macroeconomic and regulatory risks that could spark volatility. In the meantime, the central bank of Russia has proposed that lawmakers implement regulations banning domestic crypto-related activities. This ban is expected to target institutions, financial infrastructure providers, and other organizations.
Overvaluation
Some say that Bitcoin is going down due to overvaluation. However, a professor at Sussex University disagrees. She argues that the currency is currently being used as a hedge against rising inflation. However, interest rates are expected to rise multiple times next year, which could deflate the momentum. This will affect speculative assets, such as cryptocurrencies.
Tech Industries
As we’ve seen with other tech industries, this kind of disruption can happen rapidly. For example, the iPhone and Facebook disrupted the entire tech industry, and their valuations have since fallen. Bitcoin’s value is based on its potential, and it may fall even further after the hype cycle is over.
Slow Transactions
The slow transaction rate is one of the main problems with Bitcoin. why is bitcoin going down . It can take up to an hour for a transaction to be completed. One of them is to increase the size of blocks. Each block is an ordered list of files describing new transactions. This process is known as mining.
Price Swings
Another problem is that Bitcoin’s volatility has not decreased, why is bitcoin going down , even after it surpassed a trillion-dollar market cap. This has led to 20% price swings in the last few weeks. While this does not guarantee a downward price trend, it may make the price of Bitcoin less appealing to investors. In addition, Bitcoin’s lack of use as a unit of account means that buyers and sellers don’t want to charge in bitcoin.
Lack Of Intrinsic Value
Despite the shaky price performance of bitcoin, many investors still find it valuable. This is due in part to its trustworthiness. Similarly, commodities have value. They enable businesses to produce new goods and enable other forms of value creation. However, Bitcoin’s value is relative to its market price.
Why Is Bitcoin Going Down | Intrinsic Value
Bitcoin’s intrinsic value is tied to the demand for it. But why is bitcoin going down , if this demand for the cryptocurrency were to fall to zero, it would become impossible to trade or exchange it for goods and services. This would result in a collapse in buy-side liquidity. Further, the currency would be illegal in some countries, which would further erode its value.