On May 12, 2022, Bitcoin witnessed a dramatic plunge in which it hit its 24-hour-low of $25,402. After this crash, Bitcoin matched its December 2020 levels, after which it rebounded just above the $29,000 mark. Even after the rebound, Bitcoin went down by over 5% in just 24 hours. This was a massive setback after 2021, in which its prices increased by almost 70%. The prices of Bitcoin are down by 39% after its all-time high of $69,000 in November.
Similarly, Ethereum has dropped by 13% in just 24 hours, trading below the $2000 mark. Bitcoin prices have been going up and down (showing more volatility) ever since the Russian invasion of Ukraine began. The rise of inflation, increase in market volatility and uncertainty, and recent geopolitical tensions have dramatically impacted the prices of Bitcoin, even more so than expected. Amidst these geopolitical changes, Bitcoin was thought to be a hedge against inflation. However, it has not fulfilled its promises yet. However, experts still say that Bitcoin may cross $100,000 this year at some point, even after the recent drops.
Other cryptocurrencies have suffered similar losses. The most noteworthy was the stablecoin. In principle, stablecoins are pegged against the value of the US dollar. They are supposed to be a “safe” crypto asset and protect their investors from the high volatility of cryptocurrencies. The main goal of stablecoins is to maintain their value as their peg, i.e., one US dollar. However, stablecoins witnessed the most drastic plunges in the last couple of days. Two of the most popular stablecoins are Tether (USDT), USD Coin (USD), and TerraUSD (UST). Terra’s native token LUNA, which was trading at $119.18 in April, is now trading at $0.01, losing 99% of its value in just 24 hours. On the other hand, UST is currently trading below $0.45.
Why Is This Happening?
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There are several reasons for such sudden price drops. The largest cryptocurrency is now less than 50% of what it was in…
