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Crypto Crash: Understanding the Volatility in Cryptocurrency Markets



17 May, 2022


Bitcoin,Ethereum and the entire cryptocurrency market has recently come under the wheels.Particularly, Bitcoin has massively lost value in the last 48 hours which has subsequently culminated in the crypto market crash of 2022. From $39,000 it went down to $36,000 and thus the most important cryptocurrency lost almost 10% in one day. What was the reason for the crypto crash ? But first, let’s try and understand what it basically looks like?

What does a crypto crash look like?

It looks like a nightmare right out of investor hell!

The total volume of cryptocurrency assets have fallen from three trillion to just over 1.5 trillion dollars, as per Coingecko. According to data from Coin Shares, around $300 million has been withdrawn from crypto assets since mid-March, including $250 million from Bitcoin. Also from Ethereum 141 million dollars were withdrawn.

Additional blow leading to the crypto market crash came in the form of the collapse of the third largest stablecoin TerraUSD. Stablecoins are supposed to hover closely around the equivalent of the dollar in price levels, but that too depreciated by 60 cents. All the stabilization mechanisms that were supposed to support the value had failed. Its custodian, the Luna Foundation was able to stabilize the price somewhat by selling all its Bitcoin worth more than two billion dollars, yet it collapsed to less than 30 cents.

What is the crypto crash history

Cryptocurrency market crash trends have been much worse in the past. For instance, Bitcoin lost 87 percent of its value in three days between April 10, 2013 to April 12, 2013. Here are some of Bitcoin’s and quite accurately cryptocurrency market’s biggest crashes and the events that caused them.

1. June to November 2011 | Value Depreciated - 93%

Bitcoin’s first major market crash happened in 2011, reducing its value from $29 all the way down to $2. Such a crypto market crash (93%) has not happened since, precipitated by the hacking of Mt. Gox, a major centralized crypto exchange in crypto’s early days. A hacker gained access to Mt. Gox user accounts and was able to falsely “crypto crash” Bitcoin’s price to $0.01.

2. August 2012 | Value Depreciated - 56.7%

Next big crypto market crash happened, when Bitcoin Savings & Trust, a ponzi scheme promising large weekly payouts to investors, missed its payouts. Its operator, Trendon Shavers, eventually went to jail for this.

3. April 2013 | Value Depreciated - 87%

Around the time of this big crypto market crash, cryptocurrency exchange Mt. Gox was handling over 70% of Bitcoin transactions at its peak. It all started with Bitcoin rising too fast and then finally cooling off even faster after a rally of 4 months. On April 10th, 2013, the price of Bitcoin dropped 52% in 6 hours from 12:00 (12pm) UTC to 18:00 (6pm) UTC. Mt. Gox failed to handle the increased amount of trading, causing the price to drop even further. Rubbing right into the wounds of this crypto crash, Hackers decided to DDoS the Mt. Gox site, and took it down. This projected extreme uncertainty and selling pressure in the crypto community.

4. December 2013 - January 2015 | Value Depreciated - 84.6%

A month before the cryptocurrencymarket crash, that is in November 2013, Bitcoin peaked to an all-time high of $260. It kept rallying up nearly 5x or 500%, recording price value at around $1,150 by early December. Next, it began to correct, causing prices to drop. It got worse due to problems at Mt. Gox, halting all withdrawals before filing for bankruptcy on February 28, 2014.

5. December 2017 - December 2018 | Value Depreciated - 83.8%

Bitcoin marched on to a massive rally going up from $1,000 in the beginning of the year to $20,000 in December. Next, Bitcoin’s price quickly began to correct and kept falling throughout the year before beginning to stabilize. Unlike previous instances , wherein scams, hacks or mismanagement caused crashes, this time crypto market crash was simply self price correction post frenzied buying.

What has caused the crypto market crashin 2022?

The uncertainty caused by the Ukraine war, the harsh corona restrictions in China and the tightening of American monetary policy are cited as explanations – factors that are considered responsible for the crypto market crash . The price of Bitcoin this year is mimicking the American technology stock index Nasdaq-100, which is currently deep in a bear market with a minus of more than 25 percent since the November high last year. As a fallout, the popular narrative that Bitcoin is a gold substitute due to limited supply is being questioned. While the Bitcoin price has fallen by 35 percent this year, the price of gold has risen by 1 percent.

What investors need to know about the crypto crash today?

A crypto crash is always highly dramatic, but investors have the opportunity to make profits even in a crypto crash. As panic sets in, your first impulse may be to either dump your assets in Fear or Buy the dip in wild swoops. Neither is advisable without analyzing the technicals first.

Another approach can be found in Trading Platforms like Botsfolio. It offers AI powered trading of cryptocurrencies via highly branched asset portfolios ,which are risk managed and futureproof. This has a clear advantage over the direct purchase and trading of cryptocurrency. Through Botsfolio, traders can leverage pure price movements through automated bot trading. This makes it possible that even falling prices and sideways movements can be used to generate profits, in Long Term.

In addition, positions can be held such that trading assets in the portfolio allows for maximum flexibility and responsiveness to the latest developments on the market. Investors no longer need to be afraid of questions such as "is the crypto crash coming?".

So irrespective of the fact , how you ride through these tough times, the outlook looks better considering the past history of cryptocurrency market recoveries post each crash. So in conclusion, after the cryptocurrency market crash, rising prices could follow!

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