Following a fulminant crash, the Bitcoin price had been moving sideways just above the $20,000 mark for a few days, but now this psychologically important hurdle has also been taken: At 4:30 a.m. Eastern time on Saturday, one Bitcoin had a value of around $19,150, according to the platform Coinmarketcap. That’s the lowest level since December 2020.
Consequently, one Bitcoin has lost almost ten percent of its value in the past 24 hours; calculated over the past seven days, the decline is just under 35 percent. The world’s largest cryptocurrency has lost almost 60 percent of its value since the beginning of the year, and for Ether – the world’s second largest cryptocurrency – the drop since the beginning of the year is around 73 percent.
Why the Crash Happened
One of the reasons for the end of the former highs is seen in macroeconomic factors and monetary policy: Central banks are progressively raising interest rates, making investments in risky assets less attractive – this is true not only for cryptocurrencies, but also for tech stocks.
Other problems, in turn, are homegrown. The crash of the so-called stablecoin Terra USD and the associated cryptocurrency Luna, for example, pulled the overall market down with it. The Terra USD was actually supposed to be stably pegged to the dollar, but the system crashed, and in the meantime, those responsible are being investigated for allegedly misleading small investors.
Another indicator of the current mood in the market is the “Fear & Greed” index, which indicates on a scale of one to 100 whether negative emotions such as fear are prevailing in the market or whether investors are behaving greedily due to exuberant optimism. This currently stands at a value of 6, i.e. extreme fear.
Representatives of the individual platforms are also responding in line with the market environment. Coinbase co-founder and CEO Brian Armstrong, for example, announced a few days ago first a hiring freeze and then the layoff of more than 1,000 employees – around 20 percent of the workforce.
Taking a completely different direction, Changpeng Zhao, CEO of Binance, says that, unlike his competitor, he wants to hire 2,000 people despite the crisis and assumes that the current crash is a matter of “normal market fluctuations.”
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