Crypto market sees another big crash. What’s happening?

The bloodbath in the crypto market continues. The combined market capitalization of all cryptocurrencies crashed to $969 billion on Monday. It was more than $3 trillion at its peak in November 2021.

Bitcoin prices hit an 18-month low on Tuesday. The world's largest cryptocurrency fell 15% on Monday, its sharpest one-day drop since March 2020. Bitcoin has lost half its value this year and over 20% since Friday.

Ethereum plummeted to as low as $1,075, down 78% from its all-time high in November 2021. Ethereum's total valuation is now just above $160 billion.

The recent meltdown of the crypto market has erased tens of billions of dollars of investors’ money.

WHY IS CRYPTO CRASHING NOW?

• Other than the rising inflation and people losing faith in the digital currencies in recent times, the sudden crash in the last two days can be attributed to the pausing of withdrawal by crypto lending service Celsius. 
• On Sunday, Celsius had announced that it was pausing all withdrawals and transfers between accounts in order to “honour, over time, withdrawal obligations.” Celsius, with roughly 1.7 million customers and more than $10 billion in assets, gave no indication in its announcement when it would allow users to access their funds, reported Associated Press.

• Celsius, which had around $11.8 billion in assets, offers interest-bearing products to customers who deposit crypto at its platform. It then lends out coins to earn a return.

WHAT DO THE EXPERTS SAY?

• “The crypto market has been under pressure from the Federal Reserve, hiking the interest rates to combat inflation over the past few months. Bitcoin, Ethereum, and most cryptos suffered losses over the weekend after a broad sell-off following the data showing US inflation hitting a 40-year high,” Edul Patel, co-founder and CEO of crypto investment platform Mudrex, said in a statement, reported Forbes.

•  'The market is now panicking about the impact and contagion if Celsius becomes insolvent,' wrote Singapore fund manager QCP Capital in a note, reported Reuters.

WHAT SHOULD THE INVESTORS DO?

• Keep a range, and if your currency goes below that point, sell it. It's not wise to lose all your money in the hope that after a dip, the prices are going to go up.
• Buying the dip is not always a good idea. Terra Luna's market value was down to USD 1.3 billion from nearly USD 19 billion earlier this year. But, people kept investing in it in the hope of a comeback. The currency saw an almost 100 per cent crash.
• Also, before investing in a digital currency, you should do your research. Just because a new cryptocurrency jumped 100 per cent or 500 per cent in a single day, doesn't mean it will give you great returns.