The Rise and Fall of the Cryptocurrency. What’s Behind Bitcoin Crash?

Over the years, the cryptocurrency market has rapidly gained momentum, reaching a mindblowing market cap of more than $2 trillion in 2021. This is unsurprising, especially because cryptocurrencies steadily became popular digital assets enjoying increased demand and use from internet users worldwide. Although the value of cryptocurrencies, such as Ethereum, Tether, BNB, and the world-renowned BTC have enjoyed a growing demand that led to a rise in the price of cryptocurrencies, this rise was ephemeral.

While 2021 saw a strong start in the cryptocurrency market, the market’s value quickly plummeted the following year with a more than 65 percent loss in digital asset value. The fall of cryptocurrencies left traders in a dire strait and marked a turning point in the crypto market.

The Rise of Cryptocurrency

Cryptocurrencies is digital or virtual currencies maintained and utilised within a decentralised financial system. These virtual currencies are secured by cryptography in a blockchain system, making it impossible to counterfeit, duplicate, or double-spend them.

Interestingly, cryptocurrency has become so prominent that some casinos accept crypto as a payment option. These include casinos that provide no deposit bonus codes and all other types of promotions.

The first decentralised cryptocurrency to be developed was Bitcoin. First released as open-source software in 2009, BTC resulted from a peer-to-peer electronic cash system concept published by an alias known as Satoshi Nakamoto. Although bitcoins became pretty popular after it was first published, their first transaction didn’t occur until 2010 when 10,000 Bitcoin were traded for two boxes of pizza.

Regardless, it became almost impossible to ignore the steadily increasing value of this cryptocurrency as one Bitcoin went from under 14 cents in 2010 to just under $20,000 in December 2017. 

Second Blockchain Project

BTC was quickly joined by Ethereum, a second blockchain project created to be applied in numerous areas in the defi space. ETH brought the new intelligent contracts concept, creating a more diverse ecosystem than BTC lacks in its blockchain. 

Although ETH lacked the limitations that BTC suffered, it was not entirely independent, as its value was continually measured against the worth of BTC. This symbiotic relationship between both cryptocurrencies explains why ETH reached its all-time high price in January 2018.

Soon, more altcoins were introduced into the defi system. The value of many cryptocurrencies leapt, and the market was quickly overrun with demands for these digital currencies. However, this didn’t last long.

The Subsequent Fall of Cryptocurrency

Although cryptocurrencies experienced a few busts from 2018 to 2021, these fall in prices were nothing but the result of their natural volatility. But what exactly causes price volatility in the cryptocurrency market?

The defi space was sullied with problems influenced by the changes or trends within the market. Some of these problems included:

  • Supply
  • Demand
  • User sentiment
  • Hype
  • Government regulations.

All these factors constantly led to normal fluctuations within the cryptocurrency market. However, price changes never stayed down for too long before achieving some form of stability. Soon, it was easy to trace a timeline that showed the trends within the cryptocurrency market. This trend can be summarised as:

201010,000 BTC is used as payment for two boxes of pizza
20111BTC equals $1

First Mt. Gox BTC Exchange hack resulting in the loss of 2000BTC ( more than $30,000)

2013BTC exceeds a market total of $1 billion
2014Second Mt. Gox hack leads to 2 years of the bearish market
2016BTC enters bull market

ETH arrives the market

2017BTC reaches $20,000
2019Multiple exchanges are hacked

BTC falls to $9,684 in October

2020Crypto lending becomes a new feature in the blockchain cryptocurrency marketplace
2021Major coins reach an all-time high

Cryptocurrency market cap exceeds $3 trillion

Life Cycle of Cryptocurrencies

2021 marked a success story in the life cycle of cryptocurrencies. In 2021, the value of BTC and other digital coins peaked, with BTC exceeding $65,000 and ETH exceeding $4600, with even the newer coins like LUNA crossing the $100 barrier later in the year. Altogether, the cryptocurrency market crossed the $3 trillion mark late in the year.

However, the cryptocurrency market was not so lucky the next year. By 2022, the crypto market crashed as the value of digital coins went down the drain. 

In January 2022, the crypto market value dropped below $2 trillion, its value spiralling downwards with no break or recovery save for a slight increment in April when the market totalled about $1.87 trillion. By June, the cryptocurrency market hit a new low, falling far from the $3 trillion it hit the year before.

Today, the global crypto market cap is worth around $1.13 trillion, bouncing back from hitting $890 billion (in January 2023) after losing more than 60.56% of its value since it hit an all-time high in 2021.

The Fate of Major Cryptocurrencies

Although not all digital currencies took significant hits following the meltdown of the crypto market, major coins suffered more than most. From BTC to ETH and even newer coins such as USDT and BUSD, some of the major cryptocurrencies in the market that suffered a crash in value include:

Cryptocurrency($) Average rate before (2021)($) Average rate now (2023)
BTC58,051.6422, 918

But why exactly did cryptocurrency crash?

The major reason the cryptocurrency market took a hit is the slump of one of the world’s largest cryptocurrency exchanges known as FTX. 

FTX is a cryptocurrency exchange that went bankrupt in 2022 following the mismanagement of funds and a large volume of asset withdrawals by concerned investors within the system. Before claiming bankruptcy and going out of operation, FTX had a huge market and handled more than $1 billion in cryptocurrency transactions daily.

What Caused BTC to Crash?

The trouble with the steadily declining BTC price began with the bankruptcy of the FTX Exchange. FTX’s financial misfortune not only affected their system or the value of their native token FTT but also had a widespread effect on the U.S. cryptocurrency market. 

Following FTX’s troubles, BTC’s price fell below $16,000, followed almost immediately by a dip in ETH price to $1,100 and even Solana to $13. However, it was easy to see that Bitcoin took the most hit out of other cryptocurrencies.

Admittedly, FTX’s downfall might not single-handedly be the only factor that influenced a drop in the value of Bitcoins, but it undoubtedly played a significant role in BTC’s crash. With the currently unstable global economic climate, which is flawed by rising living costs and limiting government policies, FTX’s downfall pushed Bitcoin over the edge, causing its value to crash.

How To Safely Invest in Cryptocurrency in 2023

Although major cryptocurrencies, including BTC and ETH, have fallen more than 50% from their all-time high values since November 2021, some of these coins have enjoyed small surges in 2023. While these small price improvements may be nothing compared to November 2021’s peak prices, they indicate that the cryptocurrency market might bounce back soon.

But is cryptocurrency worth another try? Cryptocurrency is starting to enjoy an upward trend, but this is nothing that the market has not seen before. Small price increases are a part of the volatile characteristics of cryptocurrency and do not necessarily mean that the crypto market is out of the woods yet. If you are considering dabbling in cryptocurrency once again, it is essential to remember to do so while protecting your finances the best way you can. 

Some things to keep in mind while safely investing in cryptocurrency in 2023 include:

  • Avoid the hype;
  • Look out for crypto scams;
  • Invest only in what you understand;
  • Investigate the risks and potential benefits;
  • Invest only a safe percentage of your portfolio;
  • Choose a secure network to protect your cryptocurrency.

Final Thoughts

Cryptocurrency is a highly volatile asset with lots of risks involved. While there are formulas to predict the future values of cryptocurrencies, there is no way to know for sure. When dealing with cryptocurrencies, it is essential to remember that the tides can always change. These changes can significantly change the values of digital currencies in the market. What matters when these changes happen is to make decisions using business acumen to capitalize on your financial position.

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