January 23, 2022

Why did the cryptocurrency market crash?

Why did the cryptocurrency market crash?

Experts identify two key factors that led to the collapse of Bitcoin and other cryptocurrencies.

Events the last days in Kazakhstan have not bypassed the crypto market. It is likely that the first cryptocurrency collapsed amid the Internet shutdown in the country where most of the mining pools are concentrated.

After blocking access to the Internet, the totalhash rate dropped from peak 229 EH / s to 168 EH / s. The decrease in hash rate hit primarily large pools: 1THash, OKEx Pool and KuCoin Pool. Kazakhstan accounts for 18% of all Bitcoin hash activity. Most of the capacity remained unaffected, but this was enough to cause panic in the market and raise the fear index to an extreme value of -15.

In addition, local traders were disconnected from crypto exchanges and could not manage their positions at the time the market fell.

This whole situation can lead to re-migration of miners, but from Kazakhstan.

The second, no less important, factor is politics.Federal Reserve System of the United States. The Fed has chosen an aggressive policy of combating uncontrolled inflation. The Treasury announced the withdrawal of the accumulated dollar reserve to restore the balance of the money supply. This means that many sectors of the economy will be underfunded. Combined with the upcoming March Fed key rate hike, this led to a stock market sinking, the S&P 500 down 2% and the Nasdaq down 3.3%.

Decrease in hash rate, market slowdown and fallshares of tech giants pulled the cryptocurrency market with them. Bitcoin correlated with it sank more due to high volatility. In addition, at the end of the year, institutional assets were withdrawn from many crypto funds to rebalance annual reports. And the margin market has been unbalanced for a long time in the ratio of long positions to short positions. This situation often leads to manipulation by market makers.

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