Three Reasons Why Bitcoin Collapsed In 2022
There is no escaping the fact that Bitcoin had a terrible 2022 so far. If we look back to the beginning of the year till now and had to summarize the main reasons why this happened, here are the ones we see.
First reason – Macroeconomic pressure
Bitcoin and other major crypto coins have become highly correlated with stocks and with tech stocks in particular. As the US Federal Reserve started executing aggressive interest rate hikes to battle rampant inflation, stock markets dropped and took Bitcoin down with them. This has sparked fears of a recession in the US, a recession which could possibly spread to other developed economics.
The Nasdaq Composite is down 22.4% for the second quarter, its worst quarterly performance since 2008, which is highly remarkable. As investors tend to dump risky assets during a recession, Bitcoin and other crypto coins were particularly hard hit.
Second reason – Terra, Three Arrows and Celsius
The collapses of Terra and it’s stablecoin TerraUSD, the Three Arrows Capital hedge fund and crypto lender Celsius have all lent a hand to the narrative used by classic mainstream media that crypto is unregulated and therefore must be seen as a Wild West where anyone can go under at any time.
Third reason – Panic at the $19,500 level
The $19,500 level was the high of the 2017-2018 bullrun for Bitcoin, and many long term HODLers were convinced that as Bitcoin broke through $20k at the end of 2020, we would never break through this support again.
When Bitcoin dove straight through it in the beginning of June, many investors capitulated and panicked, making this a very important support level to pay attention to as from now on again. Bitcoin has since reached $21k again, and at the time of writing, is well above it too, trading for $20,200 at the time of writing.
Curious to see what the second half of the year will bring.
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