The crypto market has lost more than $500 billion in combined market capitalization as of early Friday. The market bloodbath resulted in the liquidation of over $700 million as leading crypto assets plummeted. Bitcoin (BTC) fell below the critical support of $40k while Ether (ETH) also lost support of $3k.
At a time when crypto advocates are debating whether the crypto market will enter a bearish phase, many wild theories flood the internet to understand the collapse. We will take a look at three such theories that many believe have fueled the crypto market crash.
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Measures anti US inflation
Consumer inflation in the United States has hit a record high and the upcoming FOMC meeting January 25-26 is expected to announce new interest rates. The Fed is expected to raise rates three times this year with increases from 0.25% to 1% according to EOY. Many market experts believe that growing concerns around inflation plus an increase in the omicron variation led to a sell-off on Wall Street, which ultimately affected the crypto market.
Bitcoin Market’s Growing Correlation with Wall Street
Market experts also believe that Bitcoin’s growing correlation with the stock market may have prompted an earlier crash. Due to ETFs and institutional investors, BTC has become more entwined with the stock market. The crypto market has been wobbling along with Wall Street.
Proposal to ban cryptocurrencies by Russia’s central bank
Another theory that seems to have gained traction is a recent report from the Russian central bank demanding a comprehensive ban on cryptocurrency mining and trading. As Cafebitcoin reported, the Russian central bank compared Bitcoin to a ponzi scheme and demanded an immediate ban on its use in the country. The central bank also warned that cryptocurrencies could pose a risk to the country’s financial sovereignty.
Russia has become the third largest Bitcoin (BTC) mining hub following China’s crypto mining ban in May. If implemented, the latest proposal for a comprehensive ban on mining Cryptocurrency in the country could lead to another realignment on the crypto mining map of the world.
The first major crash of 2022 created a wave of selling in the crypto markets, however, veteran traders continue to advocate “HODLing” as they see the drop as much as 30% is not a concern in a bull market.