Why Crypto Market is Crashing?

As the value of cryptocurrencies has fallen sharply, it has also shown that they are not as immune to financial market changes as previously imagined.

The Bitcoin market took a plunge last week. Coincidence? Markets were on edge as Bitcoin fell to its lowest level for 16 months, the world’s first digital currency. Other well-known companies’ cryptocurrencies have also fallen, with drops ranging from 30% to 90%.

It was hoped that Terra Protocol and its ecosystem would help to stabilize the crypto market, however, that hope was dashed. Stable coin UST has lost its peg on the illicit market and is currently valued at roughly $0.001. Binance, a major crypto exchange, delisted $LUNA as a result of the Terra Luna crisis. An astounding 99.9% of the cryptocurrency’s original worth was lost.

Some of the questions we’ll address here include whether now is a good time to buy, and what investors should expect from markets in the future.

The cause of the crash

The stagnant market mood has been exacerbated by factors such as rising US Federal Reserve interest rates and the Ukraine war.

There was a belief that cryptocurrencies as an asset class apart from the financial markets, sheltered from stock market volatility. Two weeks ago, cryptos showed that they are not immune to the broader market’s attitude. Last week, investors suffered a $200 billion loss.

Investors in cryptocurrencies require a strategy

Investors in crypto markets need not worry even if the current situation does not appear to be favorable. The asset class has fallen twice before and recovered to record highs each time. Long-term goals and keeping your money should be the emphasis of investors.

In light of the recent crash, diversifying one’s crypto assets is more important than ever, just like crypto has proved over the years. Depending on your level of risk tolerance, aim to hold 10-20% of your cryptocurrency assets in cryptocurrencies. Focus on the most valuable coins. Reexamine your plan of action.

Why did terra Luna crash?

The Luna cryptocurrency catastrophe has wiped out tens of millions of dollars. A major blow to crypto’s stability was also taken. Stable coins, for the most part, served the purpose of stabilizing the turbulent cryptocurrency market. This remains a mystery as Terra’s CEO Do Kwon has yet to provide an official explanation for it.

Luna is the token of Terra’s protocol. Its major role is to stabilize the price of UST while also providing liquidity to the market. It’s an arbitrage opportunity to burn UST and mint Luna so long as its price is below its peg.

Now, how about some bottom-fishing action?

The future of the cryptocurrency sector is still in question. As a result, the bear market is likely to continue as investors are reluctant to take advantage of market declines. As soon as the bitcoin’s price went below $30,000, investors “bought the dip” or bought in at a lower price, which led to another decline.

In spite of the daily fluctuations, the long-term upward trend of Bitcoin and other blue-chip cryptos is expected to continue. Investors should purchase tokens in lesser numbers as the price falls, and then do the same when the price rises. As a result, the investment’s volatility should be reduced and its profitability boosted. Buy low and cling on for life if you want to make money.