The last few days could be the toughest for cryptocurrencies in recent years. Overall, equities are down, the bond market has plunged to its lowest level in almost 9 years and risks have increased. This all has a lot to do with the pandemic caused by covid-19 at the start of 2020 and the fact that the global economy has yet to recover from such a severe blow.
To this situation, we must add the last war, which was a milestone in the history of the world, but also in the economy as usual. The war between Russia and Ukraine has generated different movements in the cryptocurrency market since its beginning. From that point on, the major cryptocurrencies began to have several points below the regular average and what some consider to be the beginning of the end for cryptocurrencies began to take shape.
The uncertainty generated by the economic situation around the world has caused investors to make important decisions, and one of them has been to reduce their investments in risky assets, as cryptocurrencies clearly are. This means that the speculative, bullish enthusiasm that characterized bitcoin and other cryptocurrencies since at least the mid to late 2020s has all but disappeared.
And if such a fall was foreseeable, it surprised many people. A few months ago, the speculative frenzy in the cryptocurrency market was at its height, only on November 10, bitcoin reached a new all-time high after a major drop following China’s ban on mining and mining. the use of cryptocurrencies.
Towards the end of last year, there were some signs that 2022 could be a good year for cryptocurrencies, but others considered it unlikely. Several analysts claimed that a major downturn was ahead for the market, and at the start of the year, the fall in the prices of major cryptocurrencies began to be felt, and although at times there were had a certain stability, this situation has changed drastically and the previous peaks are more and more distant.
Cryptocurrencies are not immune to inflation
Although it may seem that cryptocurrencies are quite far from the traditional economic structure and its mode of operation, sometimes we notice certain similarities, and among them, the fact that cryptocurrencies do not escape the inflation. While sometimes this can be beneficial for cryptocurrencies, there comes a time when the trend can reverse and affect the market.
Currently, the market is in a rather difficult environment, wars, general inflation, recessions and the surveillance of regulators have created the perfect mix for the fall in the overall value of the market. In just a few hours, very sharp drops were recorded, resulting in significant losses for a large number of investors.
And while many market participants expected rising inflation to work in favor of cryptocurrencies, the situation turned out to be different. In the case of the United States, which is the largest cryptocurrency market in the world in terms of transactions, participation and mining, it has experienced a record level of inflation that has not been seen for more than 40 years.
In the first quarter of this year, U.S. GDP fell 1.4%, leaving the country’s most important investment destination in one of the most complex times in its economy. This is why we are registering abrupt changes in the level of cryptocurrencies and if we add to this what happened with Luna and Terra, it ends up being the most dangerous and safest combination for a failure, at least and short term.
And as usual, there is always hope for growth in the market, but it is unclear what will happen. No one can predict bitcoin’s fall or rise at a specific time, it remains to wait and see how investors react amid the crisis.
Some analysts believe that the market will experience much more difficult days, but that by the end of the year, it will start to rise again. For the moment, we are not talking about the next highs because it is a distant prospect, but the possibility of a recovery is not excluded and in the best case, the market will see good days again if the good ones gestures are made.