Experts claim 3 theories fueling the 2022 crypto crash

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The crypto market suffered a loss of over $500 billion in combined market capitalization earlier on Friday. The loss in the market led to a sell-off of over $700 million as major crypto assets took a heavy hit. Bitcoin suffered a drop below the critical $40,000 support level while Ether suffered a loss of $3,000 support.

Due to the debate over whether the crypto market is entering a bearish phase, many theories have crossed the web to understand the crash. Here are some of the theories that experts consider to be the reasons that fueled the crypto market crash.

US Fed Inflation Measures:

Consumer inflation in the United States has reached a record high and the upcoming Federal Open Market Committee (FOMC) will meet on January 25-26 where it is expected to announce new interest rates. There are reports that the Fed is expected to raise interest rates three times this year, with increases rising from 0.25% to 1% by the end of the year.

According to many market experts, the growing concern over inflation along with the increase in Omicron cases led to the sell-off on Wall Street, which ultimately led to the current crypto market crash.

One of Reddit’s theories suggests that crypto was created to hide asset inflation, which leads to another “pipeline” that the US dollar passes through to inflate another asset. User Juicyjuicejuic said, “Crypto creates the perfect business vehicle for a short time, before becoming the scapegoat for any future mishaps.”

The user also said that the volatility of the crypto market is the reason behind, “why bonds and stocks are crashing because everyone bet on crypto and took money out of other assets to do it!”

The growing correlation of the Bitcoin market with Wall Street

Market experts suggest that Bitcoin’s growing correlation with the stock market has led to the crash of the crypto market. Thanks to ETFs and institutional investors, Bitcoin has become interdependent with stock markets. The cryptocurrency market depends on the flow of Wall Street.

Russian Central Bank’s Proposed General Crypto Ban

The Central Bank of Russia has announced a general ban on cryptocurrency mining and trading. According to the Cointelegraph, the Russian central bank compared Bitcoin to a pyramid scheme, after which it demanded an immediate ban on its use nationwide. The Central Bank has asserted that crypto could pose a threat to the nation’s financial sovereignty.

The first major crash of 2022 marketed a selling frenzy in the crypto market; However, professional traders continue to claim that a crash of up to 30% is not dangerous in a bull market.

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