Why The Cryptocurrency Prices are Falling?

Why The Cryptocurrency Prices are Falling?
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Bitcoin has reached a three-month low in the past week, dropping by around 10%. On January 7, the cryptocurrency slumped by 5% lowest since last September. Bitcoin touched a record high of $69,000 in November last year and has lost 40% since then. Concerns of Evergrande collapse followed the drop in the two most oversized crypto tokens, BTC and ETH, the crypto market dipped by 4.2 per cent at $2.27 trillion within 24 hours. Fitch downgraded China's Evergrande group to "restricted default" due to non-payment of offshore bond dues; this followed a steep fall in the crypto market, although it has been following a bearish trend due to the following reasons:

Internet shutdown in Kazakhstan

Kazakhstan has a growing pace of cryptocurrency mining, the political crisis and internet shutdown have had a significant impact on digital currency valuation.

The aggressive policy of the US Federal Reserve

For the past few months, cryptocurrency has been under pressure after the US Federal Reserve planned on taking a more aggressive stance by tightening interest rates to control soaring inflation. The USA recorded the highest inflation of the last 39 years. To stop the prices from soaring higher, the Federal Reserve confirmed to raise interest rates. As the bond yield increased, people pulled out their money from digital tokens and invested in government securities leading to a fall in cryptocurrency prices.

Bitcoin scam in Pakistan

Pakistan's Federal Investigation Agency has issued a notice to a popular cryptocurrency exchange, Binance, to investigate a multi-million dollar scam related to fraudulent online investment mobile applications.

The new COVID variant

The fear of the new COVID variant Omicron has also contributed to the crypto market's downturn.

Cryptocurrency prices are influenced by multiple factors, including the global economic scenario and the crypto market. A few factors directly related to the crypto market include the cost of production (mining) of a particular asset, demand and supply, governance/software updates in blockchain, exchange listings and other legal updates affecting market sentiments.