Crypto has had a rough and bumpy start to 2022. But recent days have been really negative for the industry that’s centred around digital currencies. Among crypto-currencies, bitcoin is unfortunately the star attraction of this list. But why has this fall taken place? Has the winter of bitcoin finally arrived? Know The Fact is here to answer these questions and present to you the complete picture of this situation.

According to Paul Hickey, co-founder of Bespoke Investment Group, the emergence of crypto markets has been “one of the most rapid wealth creation events in human history.” He also added that “wealth destruction is proving almost as rapid on the downside.” Data collected by CoinMarketCap suggests that the price of Bitcoin in the last 24 hours has decreased by around 16%. In a span of a week, it has decreased by around 25%. In November 2021, Bitcoin skyrocketed to an all-time high of over $68,000 and has fallen more than 60% since then. Still, Bitcoin is not the only currency that has suffered a fall.

Ethereum and other crypto-currencies
The second-largest cryptocurrency according to market value, Ethereum, has fallen by 18% over the last 24 hours. CoinMarketCap has also released data which shows that Ethereum was below $1,200 at 4 PM on June 14th and its market cap stood at $144 billion. Over the last week, the price of Ethereum has crashed by more than 30%. Other cryptocurrencies such as Cardano, Solana, and Dogecoin have fallen as well. Even stable coin Terra fell dramatically in early May, wiping out tens of billions of dollars in a matter of hours. This has been quite alarming as stable coins are seen as relatively safe as they are supposed to be backed by hard assets, such as a currency or gold.

The Federal Reserve and Inflation:
During the pandemic, the government formulated fiscal policies of stimulus money and near-zero interest rates, making it easy for businesses as well as consumers to spend and borrow. This was done to prevent the market from crashing. With the situation being better than before, the government is no longer continuing with these fiscal policies. The Fed has been increasing interest rates to combat inflation that is rampant these days.

The Case of Celsius
Celsius is a popular crypto staking and lending platform and is in the middle of a liquidity crunch. Celsius provides its customers with a yield of up to 18.63% on deposits just like banks but without regulatory safeguards. The company is said to hold $26 billion in client funds, but the amount has more than halved since October. Celsius shocked the market on July 13th after announcing that activities such as withdrawals, swaps, and transfers between accounts had been put on hold. They said that this was due to “extreme market conditions.” Celsius also said that this step was taken to “stabilize liquidity and operations.” A memo was issued by the company addressing the Celsius Community. It read, “We are taking this action today to put Celsius in a better position to honour, over time, its withdrawal obligations.”

The impact of the downfall
The breakdown in the crypto market has had a huge impact. It has erased tens of billions of dollars. The prices of Bitcoin and other crypto-assets have fallen by 20 to 40% in just over a week. Investors have been selling riskier assets such as digital currencies. This is due to their fear that the Federal Reserve will keep on hiking interest rates again this week due to worsening inflation. Inflation in the US has hit a grim milestone of a 40-year high of 8.6%.

Taking advantage of the situation
Some experts advise new investors to take advantage of the fall and buy Bitcoin and other crypto-currencies. Bitcoin and other cryptocurrencies are currently available at low prices and might prove advantageous once the crypto market starts climbing back up.