This is why crypto is crashing right now and how to prepare.
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This is why Bitcoin, Ethereum, Doge, and other cryptos are crashing.
ARE WE CRASHING?
Even though the crypto market has been going down over 11% since the start of this month but – that’s after we made 27.4% in a single month in October. This is after Bitcoin went from $15,000 in October of 2020 to $53,000 in October 2021 – that’s 466% increase in one year.
Compare that to the stock market which returned 37% in the same time frame which is still good but nowhere near triple digits like crypto. All of this is exciting to be a part of but we have to be careful going forward.
WHY IS BITCOIN AND CRYPTO GOING DOWN?
Liquidations in the derivatives and futures markets. People that leveraged (borrowed) money were forced to liquidate (sell) their crypto at a loss when Bitcoin dropped below a certain price threshold. Here is why that happened.
1. China banned bitcoin for the 10 thousandth time.
2. The infrastructure bill which was signed into law on Monday included two new provisions that affected crypto investors. The two provisions are reporting on transactions for everything we transfer on the blockchain which includes crypto, NFTs, tokens, etc. this means we’d be potentially labeled a broker which means we need to fill out form 1099-B and keep track of our cost basis – or how much we buy things for.
2a. The second change is that anyone receiving more than $10,000 of digital assets needs to report their social security and address to the IRS of the person you received money from. The changes aren’t terrible but it’s still not necessarily good for the price.
3. Bitcoin just had the Taproot upgrade which will give it more privacy, efficiency and allow Bitcoin to do smart contracts similar to what Ethereum does. One would think the price should go up, but people usually sell and collect profits on the news. In the long term, it’s a very good sign of exciting times ahead for Bitcoin.
4. The fourth reason we went down this week is because another Spot ETF has been rejected by the SEC. This is bad because a lot of Bitcoin’s price has been hyped on the assumption that we’re going to get a spot ETF this year but that probably won’t be happening.
5. The last reason it went down is because there’s a high profile legal battle over the identity of the creator Bitcoin which involves a fight over the control of 1 million Bitcoins (this creates further uncertainty about who Satoshi could be). Spoiler alert: it’s not him – but speculation creates fear and people sell causing more liquidations.
THE BIGGEST RISK IN CRYPTO:
Tether. Just as much as crypto has the chance to go up in value, it almost equally has the chance to go down depending on what happens. Tether for example is a stable coin that’s supposed to be backed by assets or commercial paper $1 for 1 stable coin but they have been cranking their printer overtime.
In October of last year they went from $15 billion dollars to almost $75 billion dollars in October of this year. That’s an increase of 5x. A large part of Bitcoin’s price growth is thanks to Tether. Even though Tether doesn’t artificially increase Bitcoin’s supply (if anything it inflates Bitcoin’s value) – the risk is when people try to sell their Tethers for dollars. If there’s not enough dollars to trade into – this would be bad for the crypto markets.
*None of this is meant to be construed as investment advice, it’s for entertainment purposes only. Links above include affiliate commission or referrals. I’m part of an affiliate network and I receive compensation from partnering websites. The video is accurate as of the posting date but may not be accurate in the future.