Why Is Crypto Market Down Today?

Why Is Crypto Market Down Today?

written by John Murphy | February 13, 2023

The cryptocurrency market has been a roller coaster ride ever since its inception. The crypto market cap peaked at as high as $3 billion and then slid down recently; most top-performing cryptocurrencies have turned red. Which arises a major question – why is the crypto market down today?

For instance, FTX’s scandal has pushed FTT value hit rock bottom. Similarly, Solana (SOL), known as the “Ethereum Killer,” has also observed the worst fall. Other altcoins, the likes of Filecoin (FIL), Apecoin (APE), Flow (FLOW) etc., have plummeted downwards.

In addition, the top cryptocurrenciesBitcoin and Ethereum – have seen a massive fall from the FTX crash. Thus, it is imperative to study why is crypto market down today.

Let us understand the key reasons behind the recent market crash.

Reasons Behind Crypto Market Fall

Although volatility is synonymous with cryptocurrency, investors have seen a bit of certainty in multiple altcoins over the past few years. However, 2023 has seen a serious dent in the crypto market cap.

There are multiple obvious reasons causing this downward trend; let us look at a few of them in detail.

  • FTX’s Bankruptcy 

One of the biggest reasons for the recent downfall is the loss of trust in the crypto market due to FTX’s bankruptcy. FTX is the world’s largest cryptocurrency exchange, serving thousands of customers globally.

Furthermore, FTX’s spat with Binance has sparked a huge sell-off in the crypto market, further reducing the liquidity of the crypto market.

  • Rising Interest Rates

The traditional financial system offers handsome interest rates to mitigate the crypto market challenge. Although it may seem a naïve attempt, it is yielding a significant impact on the overall investment in the crypto market.

So, investors have started looking back to more safe and clear return rates by relocating their investments to the hands of the conventional financial system.

  • Increased Surveillance

The crypto market has been hugely under the microscope of authorities across the globe. Many countries, including the U.S., have developed rules and regulations to monitor the market. Since cryptocurrency boasts of being a decentralized market, it has to follow a certain set of rules to operate.

Thus, many investors see the crypto market as an extension of the existing system. Hence, all those anonymous investors are pulling out their finances due to increased surveillance.

  • Taxation

IRS in the U.S. has already started following investors to pay taxes on incomes from crypto investments. It is treated as a capital gain, and applicable are applied to receive taxes. Thus, traders avoid putting their money in the crypto market and look for more tax-favored avenues.

Therefore, an increase in the tax net has adversely affected investments in the crypto market, thus reducing the market cap.

  • Global Financial Impact

Since trade with China has slowed down in the recent past to the re-emergence of Covid cases, thus the global financial system is exercising a slow trend. The lack of money inflow is also taking a toll on the crypto market.

Since cryptocurrency is somehow connected with the global financial system, thus a downward trend there is also having a shadow impact on cryptos.

  • Sell-Offs

Another answer to “why is crypto market going down today” is the sudden increase in many cryptos sell-offs. The trend has triggered panic and investors’ lack of confidence in the projects. Furthermore, consumer trust is severely dented by these sell-offs.

Thus, the crypto market cap is experiencing a nose-dive as it has halted investment due to certain sell-offs in the market.

  • Social Media Trends

Since social media is a big player in determining the value of cryptocurrencies, any negative trend severely dents the investment cycle. After FTX collapse and China’s increased crackdown on cryptos have triggered many negative trends about cryptocurrency on social media platforms.

Thus, people are following the negative feedback and avoiding investing in it. 

Frequently Asked Questions

Will the crypto market bounce back?

Based on available data, the crypto market is expected to make a return in positive ways. However, the exact recovery time is uncertain due to the highly speculative nature of it.

Is it a good time to invest in crypto?

Cryptocurrency is highly volatile; currently, it is experiencing a downward trend, so it certainly is not a good time to invest as the slide is still going on. However, for long-term investors, a slump becomes an opportunity. 

Will Bitcoin go up if the stock market crashes?

Since Bitcoin is a diversified, balanced portfolio, it did not outperform stocks; thus, many investors panic-sold everything. Thus, Bitcoin and the stock market work in silos, so it will not go up even if it crashes.

Which crypto is good for investment?

Since currently the market is sliding down, therefore investing in it is highly risky. Therefore many investors are pulling out their investments to manage their losses. Thus, it does not seem like an ideal time to invest in cryptocurrency. 

Does social media impact cryptocurrency?

Since the crypto market is highly volatile, it hugely depends on social media trends. Any positive news about cryptocurrency on social media platforms positively impacts crypto valuation and vice versa.

Parting Thoughts

The year 2023 started well as far as cryptocurrency is concerned; however, the past few weeks have left the market cap reeling for positive news. Thus, the question arises – why is crypto market down today?

We have discussed numerous key factors behind the recent downfall of cryptocurrency. The main reasons include the FTX scandal, global recession, increased government surveillance and application of taxes.

Since it attracted investment due to its decentralized nature, authorities’ involvement has severely dented its core operating feature. Therefore, investors opt out of the market to search for other investment avenues.

Furthermore, the crypto is highly speculative; thus, any negative trend on social media will leave it in tatters. Thus, a few recent incidents have shredded investors’ trust in the market, and they withdraw their investments. 

Although many experts tip the crypto market to make amends and achieve new highs, we recommend seeking professional advice before investing in cryptocurrency.

Please leave your feedback in the comments section and let us know how you think this market will go.