As cryptocurrencies like Bitcoin (and stablecoins) crash, here are four things to keep in mind.
According to the old adage, the bigger they are, the harder they fall.
During the pandemic, Bitcoin and other cryptocurrencies skyrocketed, making many inexperienced investors become billionaires, at least on paper. In November, Bitcoin, for example, reached an all-time high of about $68,000.
Today, it’s worth less than half that, thanks to a strong sell-off that’s intensified in recent weeks.
Stablecoins, a type of cryptocurrency, have fared much worse, with one in particular, TerraUSD, falling precipitously.
Here’s a quick rundown of what’s going on.
So, why are cryptocurrencies plummeting?
Simply put, cryptocurrencies become entangled in the broader market turmoil.
Investors are concerned that the Federal Reserve may need to hike interest rates quickly to combat inflation, boosting the risk of a recession.
Cryptocurrencies have been impacted by market declines, with Bitcoin down more than 20% in the last two weeks.
Some of the newer cryptocurrencies have been hit harder, such as Dogecoin, which began as a joke before taking off thanks to billionaire Elon Musk’s support.