This year, cryptocurrencies prices are plummeting. Bitcoin has lost around 37% of its value in 2022, and several alt-coins have lost much more. The year as seen geopolitical issues are crushing high-risk assets, including cryptocurrency. As interest rates rise, growth appears to be less attractive.
Let’s dig deeper and understand why the year 2022 has not been in favor of cryptocurrencies.
Increasing Interest Rates
The main cause for crypto’s price decline this year is increased interest rates. The bearish price movement in cryptocurrencies has a significant association with this year’s interest rate rises.
In early 2022, the Federal Reserve began raising interest rates. During the same period, the price of Bitcoin was also falling. These are the same trends that were seen in 2018 when the Fed raised interest rates and crypto fell.
Tumbling Investor Sentiments
A decline in investor mood is linked to the first reason. Traders are losing faith in cryptocurrency for a variety of reasons, including increased interest rates.
The reason is that the market it enables, NFTs, is sinking. NFTs are “non-fungible tokens” that serve as a gateway to other digital assets. People acquired them last year with the intention of reselling them to someone else for profit. People quickly refused to buy them, which lowered attitudes not only against NFTs but also towards the Ethereum project as a whole.
Overall Trust In Crypto See A Glitch
It’s just not one or two cryptocurrencies, but the whole crypto market is losing investors’ trust. Stablecoins, or cryptocurrencies linked to the US dollar, are among cryptocurrency’s pillars. While their value is steady, these coins are an essential element of the idea that crypto will be used as money.
However, Terra (LUNA), a stablecoin, lost value last month once it lost its peg to the dollar. With Luna no longer supporting Terra’s price, the value of both tokens plummeted. Some investors have lost all their retirement money.
