Last week investors abandoned risk assets in response to continued rising inflation, sending cryptocurrency to fresh 2022 lows.
Bill Gates, one of the world’s wealthiest individuals and a vocal critic of crypto, has criticised the industry once again, claiming that crypto and NFTs are “100% based on greater fool theory.”
Bitcoin was trading for less than $24,000, its lowest level since December 2020. Ethereum (ETH) prices fell approximately 16 percent to under $1,300, while Litecoin (LTC) and Bitcoin Cash (BCH) prices fell over 13 percent.
Bitcoin prices have dropped 50% year to far and are now trading considerably below their all-time highs of $69,000 in November 2021.
Why are cryptos falling?
Consumer prices are rising at their fastest annual rate in more than four decades, and the Federal Reserve is actively raising interest rates to combat inflation. Higher interest rates make borrowing more expensive for individuals and businesses, prompting fears of an economic downturn.
Selling pressure in 2022
Many cryptocurrency investors believe that Bitcoin is a digital-era version of gold, a potential flight-to-safety investment and inflation hedge. However, cryptocurrency price behaviour implies that the market does not regard these extremely volatile assets as reliable stores of wealth during times of economic instability.
What You Should Know About Investing in Cryptocurrencies
Early Bitcoin, Ethereum, and other cryptocurrency investors have made a fortune. However, the cryptocurrency market has a lengthy history of high volatility, which is not what investors want in a volatile market. Bitcoin and other cryptocurrencies’ volatility and link to other risk assets may eventually go away. Nonetheless, recent price activity in the cryptocurrency market implies that the rough ride for crypto investors may continue in the foreseeable future.