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Bitcoin And Ethereum Falling Down: What Has Happened To The Top Cryptocurrencies?

Read this blog to find out why the two biggest cryptocurrencies in the world, Bitcoin and Ethereum, are falling down since November 2021.
February 10, 2022

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Bitcoin and Ethereum are the biggest cryptocurrencies in the world with a combined market cap of over a trillion dollars. In fact, BTC and ETH are so popular they have become synonymous with the term “cryptocurrency”. 

Truth is, Bitcoin and Ethereum aren’t just popular on paper - their gains and losses have real-life implications. When BTC and ETH go up, cryptocurrencies are viewed favourably.

If BTC and ETH fall, chances are you’ll hear terms like “correction”, “bear market”, and “buy the dip”. If you’re reading this blog, you must’ve heard these terms being thrown around or you’re a worried BTC/ETH investor. 

What Is Happening To Bitcoin And Ethereum?

Since the start of the year, BTC and ETH have been dropping like 40 somethings during happy hours. BTC is more than $23,000 off its most recent high from November 2021. 

ETH is down by $2,700 during the same period. Cryptocurrency prices have shown the tenacity for being volatile over the years, but this particular bear run seems to have spooked investors like never before. 

Some have argued that the meteoric rise of Bitcoin and Ethereum in 2020 and 2021 is partially to blame for the mass panic. Think of the investor who got into BTC at $60,000 in November 2021. 

BTC was trading below $33,000 at one point last month, which means the investor would’ve been sitting on an unrealised loss of 45%. The panic is understandable, isn’t it?

What follows panic in the markets is mass sell-offs, which is known to drive down the price of assets like cryptocurrencies and stocks. That being said, context is important. 

There are genuine factors associated with the wider world economy, a new covid variant, and more that have played a part in the downfall of Bitcoin and Ethereum. Let’s examine each factor in detail.   

Why Are Bitcoin And Ethereum Falling?

1. New Covid Variant

Bitcoin and Ethereum began their downward spiral when a new covid variant named “Omicron” started surging in November 2021. This knocked BTC and ETH off their all-time highs. 

WHO classified Omicron as a new variant on 9th November 2021, precisely the day when top cryptocurrency prices fell. Here’s a snapshot of ETH since then. 

BTC price after Omicron


The new covid variant was just the start of what was to become one of the biggest crypto market corrections in recent history with Bitcoin and Ethereum at the centre of it all.  

2. Rising Interest Rates

The US government recently toyed with the idea of raising interest rates sooner rather than later. Governments do this to control inflation, as higher interest rates mean greater difficulty in obtaining money. 

Moreover, rising interest rates mean that it’s costly to borrow money for financial institutions, who inevitably raise their prices which eventually affects consumers. 

All in all, institutions and consumers are left with little to spare for volatile assets like Ethereum and Bitcoin when interest rates rise, eventually switching to relatively safer investments like bonds. 

3. Semi-Permanent Inflation

The US government recently announced that it is scaling back its support to prop up the economy. This simply means that it won’t be printing money en masse anymore. 

A decision of this magnitude is done to control inflation, which is surging not just in the US but in other countries like Turkey, Argentina, Brazil, and more.

Country

Inflation In %

Argentina

50.9

Turkey

48.69

Brazil

10.06

Russia

8.4

Mexico

7.36

United States

7

Buying basic amenities like food and clothing become significantly expensive during times of high inflation. An investor would ideally prefer to secure their daily needs during such times. 

4. Crypto Regulations

Bitcoin and Ethereum’s wider acceptance hinges on crypto regulations and laws. Positive regulations like El Salvador making BTC legal tender signal that it isn’t just a fad.

On the other hand, negative regulations like bans mean that investors may think twice before investing in BTC or ETH. This uncertainty that surrounds the broader crypto world adds to its volatility.

In fact, just the news of a proposed ban is enough to spook the crypto market. That’s what happened when Russia tabled a proposal to ban crypto trade on 20th January 2022.

BTC reacting to Russia ban
BTC reacting to Russia’s ban

5. Inherent Volatility

Bitcoin and Ethereum are evolving assets that are relatively new compared to stocks and bonds. Investors are, through buying and selling, discovering the actual price of BTC and ETH. 

This is why Bitcoin and Ethereum are inherently volatile - they’re purely speculative at this point. Speculation and price discovery are necessary evils to arrive at the true price of an asset like cryptocurrencies.  

What happens during the price discovery phase, however, may not always be pretty. BTC, for example, has lost 50% of its value more than 8 times in the past. 

Take a look at the all-time BTC graph to see for yourself. 

All-time BTC graph

Current Situation Of Bitcoin And Ethereum

Any asset rapidly losing value is never a pleasant sight. There are actual people invested in them who are losing money, especially in the case of crypto where the lows hit harder due to the volatility.  

But all is not lost as the situation of top cryptocurrencies is slowly improving. BTC is just down by a little over 2% since the start of the year and has regained the $44,000-mark as of writing this blog. 

ETH’s recovery is slower and is down by approximately 13% YTD. Even so, ETH is trading at $1500 higher than it was at the same time last year. Whether BTC and ETH regain their all-time highs remains to be seen.

But experts think that the recent uptick is a step in the right direction. So, does this mean you should buy or sell Bitcoin and Ethereum due to the recent volatility? Let’s find out.

Should You Buy Or Sell Bitcoin And Ethereum?

It’s true that BTC and ETH have generated remarkable returns over the past few years. But the devil lies in the details. BTC and ETH’s highs are very high and lows and very low. 

Furthermore, Meta (formerly Facebook) revealed a loss of $10 billion from its augmented and virtual reality division on February 2nd 2022. This impacted BTC and other cryptocurrencies too.

Meta is thought to be leading the charge for the metaverse with cryptocurrencies at the centre of the puzzle. Setbacks to Meta’s AR/VR business, experts suggest, could shine a negative light on crypto.   

Risks aside, there’s also the problem of too many pseudo-experts in the field of cryptocurrencies. That’s not surprising considering how lucrative assets like BTC and ETH have become. 

At the end of the day, Bitcoin and Ethereum are “market-related” investments so there are no guarantees. Thus, you must turn to actual experts who’ve been in the game for a long time. 

Finding these experts isn’t easy because, as we discussed, there are too many people with too many opinions. Lucky for you, Cube’s Tikka Token will give you access to top-notch crypto advisors in the future. 

For now, it’s wise to tread cautiously and examine your risk profile, financial situation, and other important factors before investing or exiting Bitcoin and Ethereum. 

Note: Facts & figures are true as of 08-02-2022. None of the information shared here is to be construed as investment advice. Exercise caution when investing in unregulated assets like cryptocurrency.

Priya Bansal
Curious about personal finance and all things money. Can either find me reading a book or dancing to a tune.

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