Why are cryptos declining

Reasons why cryptocurrencies like bitcoins facing an evolving challenge

Bitcoin’s prices have decreased and increasing more concern as the crypto market is again becoming a sea of red.

The last quarter months of 2021 evidenced a serious drop in the stock market.

The second-largest crypto Ether meanwhile plunged more than 14 per cent since its record to reach $4,244 just in the last quarter in November.

The reasons why cryptos have been so volatile of late is unclear but there are a number of factors at play.

One reason may be due to market manipulation, And it is all to do with Tether, a blockchain-based cryptocurrency whose tokens are backed by an equivalent amount of US dollars.

Tether pumping up prices

Tethers are supposed to be all backed by dollars. There’s a lot of reasons like settlements with the authorities that suggest this has not been the case in the past, and we shouldn’t presume it’s the case now, So it looks like three billion Tethers, backed by nothing, were used to pump the Bitcoin price up at this particular time.

When they stopped, the Bitcoin price dropped. That’s the story of the shenanigans that went target in recent months , this kind of market manipulation and fake liquidity happens all the time.

Stockpiling Bitcoin

The other reason for the crypto price slide is the continued fallout from China’s crackdown on Bitcoin mining, which led to an exodus of miners to the US and Canada.

China’s National Development and Reform Commission said on it would continue to regulate crypto mining due to concerns over the amount of energy being used.

it is not just because of mining regulation that crypto prices have slumped but those exiled miners have a billion dollars of Bitcoins that they are keeping as stockpiles and not selling them.

No one can really account for this because Bitcoin miners have never behaved like that, except when they can’t sell the coins because there aren’t enough people with dollars to buy them.

But the hype around cryptocurrencies and blockchain has not dwindled. The Staples Center in Los Angeles said it would be renamed the Crypto .com Arena, making it reportedly one of the biggest naming rights deals in history.

It could also be that the market is undergoing a retrace ment. It is the temporary price reversals that take place within a larger trend. The key here is that these price reversals are temporary and do not indicate a change in the larger trend.

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Courtesy:Financial Times

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