The crash wiped billions from the crypto market, and came less than a week after Bitcoin reached a record high of over $69,000
The crypto market crashed on Monday night (Photo: Reuters)
By Alex Finnis
December 3, 2021 6:10 am(Updated 1:48 pm)
The cryptocurrency market suffered a big dent in November, after Bitcoin and other major coins crashed by more than 10 per cent.
The drop wiped billions from the crypto market, and came less than a week after Bitcoin reached a record high of over $69,000.
Bitcoin recovered some value after falling below $60,000, but has since dipped again. It is currently at around $57,100.
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It means Bitcoin has lost around 18 per cent of its value in around two weeks.
Ethereum, Solana, Ripple, Cardano, Dogecoin and Shiba Inu all followed suit, and have dropped by similar amounts.
Why did the crypto market crash?
A number of factors have likely contributed to the crash.
A major one is the US Securities and Exchange Commission (SEC) rejecting a spot bitcoin exchange-traded fund (ETF), which would likely have seen billions poured into the crypto market.
China has also ramped up its clampdown on Bitcoin mining, which helped cause the last crash earlier this year.
China’s National Development and Reform Commission said on Tuesday that it would consider “punitive electricity prices” for some crypto mines in the next stage of its crackdown.
The dollar has been strengthening against other fiat currencies this week, but also appears to be strengthening against crypto.
This is in part because interest rates are rising, which can drive down inflation.
Twitter’s CFO Ned Segal also made negative comments about cryptocurrency, which may have helped sway the market.
He said investing cash into crypto assets “doesn’t make sense” right now.
On top of this, there is also what has become crypto’s natural cycle. People tend to sell their assets off when they reach record highs, as happened last week, and big sales can cause value to drop.
Crypto price predictions
Matthew Dibb, COO and co-founder of Stack Funds, told CoinDesk that Bitcoin could continue to lose value.
“We have noticed some larger sales occur on Bitfinex as well as openings of new short positions,” he said.
“While liquidations so far are quite low by historical standard and funding rates are approaching flat, we could see a further cool-off in BTC for the short term as momentum is beginning to stall.”
However, plenty of analysts are still very bullish about cryptocurrency’s long-term future.
Dutch analyst PlanB has suggested a prior predictions Bitcoin could hit $135,000 in December is “still in play”.
The group has found success predicting cryptocurrency growth in the past.
A growing pocket of analysts are predicting Ethereum to eventually surpass Bitcoin as the world’s largest cryptocurrency.
“I definitely think there’s a really good chance for Ether to surpass Bitcoin. I wouldn’t be surprised if it happened within the cycle,” Rahul Rai, the co-head of market neutral at BlockTower Capital, told Insider.
“Very tough to predict when this cycle will end. My take is mid-next year.”
He added: “Ethereum is trying to power the rails of all of global finance in the future, and that is a much bigger market, if it does succeed.
“If it does succeed, and if the thesis plays out, then the market value is going to capture trillions of dollars in global activity.”
Should I invest in cryptocurrency?
People invest at their own risk and cryptocurrencies are not regulated by British financial authorities.
All crypto investments are risky, but meme coins like Shiba Inu are particularly volatile, and you should be prepared to lose everything you invest.
The Financial Conduct Authority (FCA) warned in January: “Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors’ money.
“If consumers invest in these types of product, they should be prepared to lose all their money.”
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown previously explained the risks to i.
She said: “On top of being extremely volatile, most cryptocurrencies are unregulated, which not only adds another layer of uncertainty but also means that investors have little or no protection against fraud.”