The collapse of cryptocurrencies: why Bitcoin and Ethereum fell to their lowest level in a year | The causes of the crash

The markets of cryptocurrencies they had a weekend to forget, and this Monday the price crash worsened. Bitcoin fell 12 percent and Ethereum 15 percent. This is the lowest price in more than a year. The instability is due to “Cryptoinversion”the crisis that hit the market in early May and from which they failed to recover.

Why are cryptocurrencies collapsing?

On the one hand, Bitcoin – the most popular and largest cryptocurrency – has fallen below $ 24,000. It reached a low of $ 23,300 on Monday afternoon.

On the other hand, Ethereum – which follows bitcoin – fell to its lowest level in more than 14 months, trading around $ 1238.

Saltmeanwhile, it fell more than 15 percent to about $ 27, according to the latest CoinMarketCap data.

It seems that the immediate trigger for the cryptographic crash is sell-off by investors amid growing fears of inflationdue to the fact that the Federal Reserve changed its monetary policy last May (it dropped the 0% rate and announced a 1% increase, the minimum to counteract inflation, the highest in 40 years, a phenomenon that affects much of the world as a result of the war in Ukraine).

Similarly, experts say that the decline in the price of cryptocurrencies shows reduced risk appetite among investors who are wary of risky assets.

“The cryptocurrency market is under pressure from the Federal Reserve, raising interest rates to fight inflation in recent months. bitcoin, Ethereum and most cryptocurrencies suffered weekend losses after a sell-off after data showed the highest inflation in the United States in 40 years, ”said Edoul Patel, co-founder and CEO of the platform. Mudrex crypto investment.

“As investors appear to have panicked, the number of cryptocurrency liquidations has been high since Friday. Bitcoin and Ethereum have fallen by up to 7% and are currently trading at their lowest levels: $ 25,000 and $ 1,300, respectively. This downward trend is likely to continue in the coming days, “he added.

The future of cryptocurrencies

In August this year, Ethereum will change its current Proof of Work (PoW) mechanism to a Proof of Bet (PoS). The whole crypto ecosystem is waiting The “merger”. What does this mean?

The Fusion will transform Ethereum from this current model, known as proof of performance, into what is called proof of pledge, which will lead to the end of ether crypto-digging. Instead, cryptocurrency owners who have a certain amount of ETH can deposit it and become a validator.

From the specialized portal BeInCrypto They pointed out that with The merger, Ethereum emissions will decrease by 1.3% per year.

“It took 10 years to develop this model of security, through countless debates among community members. ETH will soon be deflated, as long as the network is secure enough, “they added.

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