![]() Within a matter of days following the Terra collapse, a chain reaction ensued that caused hundreds of billions of dollars in value to vanish from crypto. The market data was written on the walls, so it was only a matter of time. The collapse of Terra had a sea of implications for the entire crypto market and was an indisputable signal that crypto winter had arrived. Dumping BTC on the market caused the Bitcoin price to plummet even further. Not only did this move ultimately fail to save Terra-costing investors billions of dollars-but it also left more damage in its wake. While some believed that Terra laid the foundation for algorithmic stablecoins to break new ground, the underlying mechanism was far from sustainable. Investors large and small grew more confident in UST as new investors kept getting lured in by double-digit yields on the Anchor DeFi platform. While these macroeconomic shifts developed in the background, Terra's algorithmic stablecoin protocol grew to $40 billion and the LUNA crypto price went up alongside it. Digital assets would inevitably face trying times as all signs pointed to an oncoming crypto winter. In the first quarter, Bitcoin's price was strained but barely supported at $38,000 as central banks around the world followed the Fed's queue and tightened their monetary policies. ![]() Ecosystems collapseĬrypto was hurting by the start of 2022, but the fear scale hadn't yet reached critical levels. Crypto investors had to be on high alert as just one small faltering would send the entire asset class tumbling. While crypto winter had decidedly begun by the new year, markets were still only flirting with crypto bearishness. As the discussion of interest rate hikes entered the milieu, investors grew more circumspect about digital assets, and crypto prices fell significantly-but this wasn't the crash.Īs the Federal Reserve shifted gears on its monetary policy, the unfettered growth of digital currencies and crypto projects ground to a halt. Bitcoin's price saw speculative pumps as venture capital money flowed into the industry fueled by speculation and hype over the new disruptive asset class.Ĭrypto markets shot up as investors introduced new capital, but this took a turn when the Federal Reserve suddenly determined that inflation was too high at the end of 2021. ![]() Crypto became an increasingly popular risk-on investment among both institutional and retail investors. One of the main underlying causes of the crypto price drop originated from outside the crypto industry. Though it's practically impossible to attribute the cryptocurrency market crash to specific causes, we can look at how certain events contributed to a crypto financial bubble that eventually burst. ![]()
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