After culminating in a relatively successful year for cryptocurrencies in 2021, it was expected that by the beginning of 2022, the same upward trend that many fell in love with and invested in to continue obtaining benefits from Bitcoin’s price fluctuations would continue.
Unfortunately for many, the situation was different, but this does not mean that investment spirits have ended; due to a series of events that should not influence the commercialization of cryptocurrencies, they have managed to violate the digital financial market.
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Market analyses have concluded that cryptocurrencies have decreased in value by around 60 percent, resulting in value for investors and even leading to a crypto winter.
Traditional financial market factors affect the digital market
The collapse of the leading cryptocurrency, bitcoin, was the most alarming situation in the digital market in the last year.
This situation was attributed to several problems that, although they are not part of the digital market, have wreaked havoc in this environment.
An increase in interest rates, the lack of control of inflation, a war in full swing, some failures in creating cryptographic projects, and the collapse of exchange platforms have contributed to the prices of cryptocurrencies suffering drastic falls.
The economic and financial situation that the United States has been going through has been one of the critical points in the involution of the price of cryptocurrencies. However, the purpose of these digital assets is to contribute to the reduction of inflation and serve as financial instruments against crises.
From an economic and social perspective, cryptocurrencies have shown that they are vulnerable to trending news, which is why their valuation is constantly changing.
Such is the case of what happened at the beginning of February 2022 between Ukraine and Russia, a warlike situation that affected not only the parties involved but also their entire environment, which is why when a confrontation arose, finances and countries’ economies entered a recession.
It is where cryptocurrencies come in and participate since blockade measures are generated to pressure the weapons and the confrontation to cease.
Not seeing results, both countries have adopted cryptocurrencies as a financial tool to carry out the transactions and marketing operations that these two countries maintain with the rest of the world.
After this situation, the value of Bitcoin was significantly affected, which hit a floor when it fell from a price maximum registered in November of almost 60,000 dollars in October, touching 18,000 dollars.
Another factor that had a notable influence was the fall of the shares that make up the NASDAQ; consequently, the Fed’s statements splashed all the elements of finance, only some in more significant proportion than others.
The sale of digital assets is considered another of the causes that could have caused this difficult stage for Bitcoin and the rest of the cryptocurrencies since many users found themselves in the situation of selling to pay what corresponds to national taxes.
Stability is not your best ally.
Cryptocurrencies have been characterized by being highly volatile and where the unity of supply and demand is relatively high, so their values can change in minutes without prior notice.
This digital financial market is one of the riskiest. Still, even so, it usually grants its users benefits in a large proportion, which is why many foresight investors tend to acquire more cryptocurrencies
when trends tend to go down.
It is to recover more capital at the end of the year when the upward trend has been quite considerable.
Volatility is essential to the financial markets; some digital or traditional assets are exposed. That is where users, when making movements, influence their percentage of the action.
Bitcoin has had a resounding variation to the point that it can be indicated that its valuation has decreased by almost 60%.
Conclusion
There are several situations, simple as a message on social networks from an influential businessman or the fact that a country reflects a position in favor or against cryptocurrencies, which will cause its market capitalization and value per unit to vary.
These variations are often incredible since cryptocurrencies are decentralized, but those who use them are the people who are part of the traditional market.
