Crypto Crash 2022: A Global Financial Mayhem

Key Highlights:

• The Crypto market has plummeted 44% from $3.1 $trillion in Nov 2021 to $1.3 trillion in May 2022.
• Currently, the value of Bitcoin, one of the commonly used cryptocurrencies, is now below $30,000 from $68,000 (Nov 2021).
• Almost 100% erosion in market capitalisation of LUNA, the 4th largest Cryptocurrency, has also seen the fall with a 99% drop.
• EL-Salvador, the only country to legalise crypto, is witnessing the worst economic depression.

Are you wondering whether it is a good time to invest in the crypto market and earn some profits?

Since the existence of cryptocurrencies, this volatile market has fallen from its all-time high in 2021, and recovery of these digital assets seems unlikely anytime soon. Many crypto investors are pulling their money out of the market amidst rumours, sentiments and an ongoing global meltdown. Others, however, are still taking it slowly, hoping for a considerable investment return. Cryptocurrency, one of the highest-paying returns on investment assets in the market, which initially brought a storm, is currently hit by the most terrible devaluation rates. The world faces this gripping fear of economic crisis due to the continuous fall of the value in the past six months.

An ongoing geopolitical crisis, pandemics, high oil prices and recession have contributed to this global financial mayhem in the Cryptomarket. And the aftermath of the crashing of the market has led to an increase in the national debt of El-Salvador, the only country which had legalised Bitcoin. 

To understand the crypto chaos and how it has affected the world, let’s first learn about El-Salvador’s connection with the same.

Why is El-Salvador the Worst Affected?

El-Salvador, a country in Central America, gained popularity recently with the legalisation of Cryptocurrency. It accepted Bitcoin as its official currency. Nayib Bukele, the President of this country with the vision of making El-Salvador a mining hub, invested a massive amount in Cryptomarket. As per Bloomberg’s data, his administration paid around $103 million on 2301 bitcoins in multiple purchases.

But the Bitcoin value is $67 million after the crypto crash in 2022. This led to a default on the payment against the national debt of $23.3 billion in El-Salvador’s economy.

As per the sources, most Salvadorans (67.9%) don’t agree with the government’s decision to legalise Bitcoin. And this can also cause social issues in El-Salvador, striking the current government’s steps in further investments.

see also@ Crypto Exchange: An Intermediary between Buyers and Sellers

Crypto Market Crashing Down – Why?

The great Crypto fall has triggered a spooky fear among the investors, leaving them worried that they will never recover from these losses. After recording high returns in 2021 and creating quite a buzz around the investment space, crypto investors have felt bearish sentiments in the past few weeks. The market’s crashing has also evoked severe concerns that might initiate a financial catastrophe, affecting the larger economy. 

The Crypto market has shed almost $2 trillion in value. Initially, at its peak in November 2021, the currency’s value was $3.1 trillion as per CoinGeko’s data, a company that aggregates crypto data. But in the second week of May 2022, it came crashing down to $1.3 trillion. Bitcoin has fallen by more than half of its value, while the digital currency Luna and Terra USD are currently worthless.

There are several factors contributing to the downfall of the crypto market; we digged deep and have come up with the following potential reasons:

• Invasion of Ukraine, resulting in the economic crisis globally.
• The pandemic situation was no less than horror, but the aftereffects were even worse. 
• China’s recent announcement to clamp down on the cryptomarket with restrictions on its transactions led to the crashing of the market and a plummet in the prices.
• Elon Musk’s recent announcement, where he took a U-Turn from his decision to accept digital currency, has also fueled the depreciation in the investment market.

Current Prices of the Cryptocurrencies

Regular dips and rises is a usual nature of the crypto market. Several factors contributing to the fluctuations have created havoc among crypto investors. But there is still some hope for a few currencies which can be seen in the past few days.

Let’s take a Look at Some of the Current Market Values of the top ten Cryptocurrencies as of 27th May’22:

Source: coinmarketcap.com/charts/

Will the Crypto Market Ever Recover?

With all the gloom and doom, everyone is wondering if the crypto market will ever rise from this greatest fall of the decade. If you believe the industry experts, it still has the potential to grow over time despite the volatility. This rise and fall have been the nature of crypto assets since their existence. Cryptocurrencies have witnessed many steep drops and eventually have the potential to return lucrative profits to investors. Many market experts know that cryptocurrencies have survived battered supply chains or pandemic, so this shall pass.

Though nothing is inevitable, and industry is divided. Where few still see some ray of hope around this chaotic market, some experts fear the worst is yet to come.

But, investors couldn’t resist buying such lowest dips in currencies despite the market’s vulnerability. However, analysts have warned against the recovery anytime soon.

Speculations are there as per some global reports according to the following criteria:-

• Global Crypto Market Cap- $1.25 trillion down by 13 %
• Developer activity- 70%
• Startup activity-60%
• Social media activity-80%

As per these percentages, some potential rise can happen in the near future.

see also@ Salary in Bitcoin: The Next Big Thing?

Precautions for Young Investors

The Crypto market is highly volatile, with a sudden surge in prices and then depreciating unexpectedly. This might tempt the young investors to buy digital assets, hoping to earn some profitable returns at a lesser price. But, one should always be ready to face the worst. Here are a few suggestions that might come in handy before you jump into buying some crypto assets:

• No Panicking. Sometimes rational decisions may end you up with heavy losses. One should analyse their goal before investing a single penny. This depends upon how you plan your investment with two important factors- either you are here to earn a quick return on short term trading or want a long term investment plan.
• Assessing the Current Situation and Staying Updated. Last year, China’s clampdown and Musk’s announcement affected the market abruptly. Also, with whales dumping the Bitcoin into the market, fueling the crash of Luna was a huge setback for the investors. So, keep yourself updated and invest periodically rather than staking a large amount at risk. 
• Analyse the Future Accordingly, and then you can strategise your investment plan. Though it remains the high-risk investment option to stake your money, one can try betting over Bitcoin as it has shown some potential improvement in the past few days.

At the time of writing this article, there was a slight rise in the pricing of Bitcoin, Dogecoin and a few other cryptocurrencies. But yes, with high profits comes a potential amount of risk too. So it is suggested that young investors should keep long-term investments in mind. And continue mapping the developer activities along with reading the investment spaces.