Cryptocurrency Market Is Crashing; Will The Market Recover?

Last Updated May 20th 2022
5 Min Read

Will the crypto market be able to recover again after the crash? Let’s see. 

The cryptocurrency market has had a massive crash. The sudden evaporation of a $40 billion digital token, the LUNA, and the spiking up of Fed rates brought several digital assets to their all-time lows. Bitcoin has fallen below $30,000 as the market continues to reel after Terra’s crash. In addition, the prices of all the major tokens have slid, creating concern among investors and stakeholders.

Will the market recover any time soon? Several experts think it might have already started bouncing back. The global cryptocurrency market cap increased slightly over the past few days, while Bitcoin also showed signs of recovery. Does it mean the market will recover to its previous peak? Let’s dig deeper.


Why Is The Cryptocurrency Market Crashing?

2022 was not a great start for several cryptocurrencies, as the crypto and equity markets have been selling off since the start of the year. The reasons were many, with headwinds as varied as inflation, rising interest rates, the war in Ukraine, and now, the massive crash of stablecoin LUNA.

As the TerraUSD (UST) stablecoin crashed far below its $1 peg, Bitcoin fell below $30,000, sinking to $26,597, adding more downward pressure on the overall market. This is the first time since July 2021 that Bitcoin has traded below the $30,000 mark. Along with BTC and Terra, cryptos like Solana (SOL) and Cardano (ADA) have also crashed to their lows. Even Ethereum, the second-largest cryptocurrency by market cap, exhibited a significant downward trend adding to investors’ fear.

The global financial inflation, the growing Russia-Ukraine tension, and a generally volatile market have all contributed to the crypto crash. However, the sharp price drop of the LUNA token as TerraUSD lost its dollar peg and the looming interest-rate hike of the Federal Reserve seems to have done the most damage to an already volatile market. These factors have put up tremendous pressure on the crypto market as we witnessed panic-selling by investors to park the cash for better times.


Will The Market Recover Anytime Soon?

Interestingly, several altcoins saw tremendous growth over the past few months and outperformed BTC. For example, altcoins like MATIC posted good gains, suggesting that traders still showed a greater risk appetite. Moreover, Bitcoin has also shown some minor signs of recovery, and the market seems to have started picking up the pieces from its recent downward trend. In addition to BTC, cryptos like Binance coin (BNB), Ethereum (ETH), and Ripple (XRP) have also shown a higher rate of recovery over the past few months.

Moreover, experts say that the market will likely recover soon as Bitcoin and crypto-assets, in general, have been in the maximum brunt of broader market sell-off sentiment and regained their value over the past. As the market sentiment and fear have cooled off a bit, the price of cryptocurrencies is slowly reclaiming its value and price.

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Is The Market Crash An Opportunity For Investors?

Analysts say that the cryptocurrency market crash is yet another buying opportunity for investors to buy their favourite token at an affordable price. The crypto market is prone to volatility, and history has shown us that every market crackdown opens a new opportunity. This could eventually become a great buying opportunity for investors who hold a long-term view of the markets because the long-term fundamentals of Bitcoin and several other altcoins are strong.

Every crypto market reset not merely led to price-market capitalization increases but also cleared the way for rapid innovation. For instance, the first major market crackdown was when the only Bitcoin exchange in the world, Mt. Gox, imploded following a nearly half-billion-dollar hack. Although there were losses, two of the biggest exchanges in the U.S., Coinbase and Kraken, were born out of the ashes. Further, The DAO Hack in 2016 and the ICO crash set the layout for the growth of DeFi and the popularity that DAOs enjoy today. Finally, taking the latest example, experts say that it would be hard to imagine companies like Tesla buying Bitcoin before Covid 19 and the pandemic.

Potential investors looking to buy the dip understand that market fluctuations are a part of the crypto market and have to be prepared for this kind of volatility going forward.


A Final Word

Severe bear market crashes in the cryptocurrency sphere have almost become a common criterion. For instance, Bitcoin is only 12 years old, and the cryptocurrency market has had as many severe crashes, showing that the area is prone to severe volatility. As a result, cryptocurrencies like Bitcoin, Ethereum, and other leading assets saw their values plummet in the latest market crash, hitting traders and investors worldwide. But, although the cryptocurrency market is crashing, experts believe that the market will recover soon, setting off the bull run.

But each investment journey is unique and should be done with due diligence, considering your risk appetite.

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