Reasons for Bitcoin's plunge

The reasons for Bitcoin’s plunge include: the Federal Reserve’s interest rate hikes, concerns about a global economic recession, cryptocurrency exchanges suspending withdrawals, geopolitical uncertainty, overheated speculation and other factors. Additionally, Bitcoin price fell below support levels and the miner reward halving also exacerbated the decline. The possibility of Bitcoin plummeting still exists, and investors should invest with caution.

There are many reasons for the collapse of Bitcoin, mainly including the following factors:

Macroeconomic factors:

FedRaiseInterestRate: In order to curb inflation, the Federal Reserve is expected to start raising interest rates in the second half of 2023. Raising interest rates will lead to a reduction in market liquidity and a general decline in the prices of risky assets, including Bitcoin.
Concerns about global economic recession: Factors such as the Russian-Ukrainian war and the epidemic have led to a slowdown in global economic growth. Investors' concerns about economic recession have intensified, and risk aversion has increased, causing the prices of risky assets to fall.

Cryptocurrency market factors:

Cryptocurrency exchange Celsius Network suspends withdrawals: Celsius Network is a large cryptocurrency exchange whose suspension of withdrawals triggered market concerns about cryptocurrency liquidity risks worries.
Three Arrows Capital Liquidation: Three Arrows Capital is a large cryptocurrency investment fund. Its liquidation led to a large amount of Bitcoin selling, exacerbating the market decline.

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Geopolitical Uncertainty

Uncertainty and market volatility caused by geopolitical events such as the Russia-Ukraine conflict have caused investors to flock to safe-haven assets , such as gold, while selling risky assets such as Bitcoin.

Speculation overheating

The past few bull markets of Bitcoin have been accompanied by speculative overheating and bubble formation. When market sentiment is high, investors may purchase Bitcoin at a price higher than its intrinsic value. When the bubble bursts, prices fall sharply.

Technical factors:

Bitcoin price breaks through important support level: Bitcoin price fell below the important support level of $20,000, causing panic to spread in the market and triggering further declines.

Other factors:

In addition to the above main factors, the price of Bitcoin is also affected by other factors, such as:

Miners Rewards halved

Institutional investor participation

Exchange hack

For others Cryptocurrency Competition

China Regulatory Policies: The Chinese government has recently cracked down on cryptocurrency trading, causing Chinese investors to sell off Bitcoin.

The possibility of Bitcoin plummeting exists. Since the price of Bitcoin fluctuates greatly and is affected by a variety of factors, the possibility of another plunge in the future cannot be ruled out. Investors should carefully consider the risks and rewards before investing in Bitcoin.

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