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CRYPTOCURRENCY

Cryptocurrencies: when was the last time the Bitcoin price dropped below $24k? What are the reasons?

Bitcoin’s nightmare year hits another low as its value falls to its lowest level since 2020. What is behind its struggles in 2022?

Update:
A woman shows a stock graph on her phone with the price of Bitcoin in relation to the dollar in San Salvador.
JOSE CABEZASREUTERS

Less than a week ago, we were writing about a sudden rise in the value of Bitcoin. It had risen to $30,000 from around $27,000 in May. However, the fickle nature of cryptocurrency markets has been once again proven. The value has sunk to under $24,000, its lowest value in two years, including a staggering 14 percent drop in the last 24 hours.

Since its record value of $69,044 on November 10, 2021, Bitcoin has lost 65.6 percent, nearly a full two-thirds of its value.

What are the reasons?

Simon Peters, eToro market analyst, told GOBankingRates that there are varied reasons for the collapse in price of Bitcoin. One of these is the most recent consumer price index (CPI) measure which showed year-on-year increase in inflation of 8.6 percent and rising.

Last month also saw a steep fall in value for cryptocurrency as multiple stablecoins collapsed. These are cryptocurrencies that support their crypto assets by controlling the equivalent in real world assets, meaning they should never really trade for under $1. However, tether, the largest of these coins, began trading at $0.98, meaning it was at risk of not having the capital to pay investors. While this is usually righted, the gap to its tether became so wide that it collapsed.

Tethers are important as cryptocurrencies are supported by the holding of reserves by said tethers to pay out investors. A collapse of the tethers would leave investors unable to be paid for selling their tokens. As sales increase, the risk of the tethers running out of capital becomes more real. The collapse of stablecoin Luna last month lost investors more than $40 billion.

All in all, the market is not in a good state for investors of traditional stocks or cryptocurrency, due to the extreme volaility present in both markets.

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