Written by Jonny Fry
Writers linkdin: https://www.linkedin.com/in/jonnyfry/

Digital Bytes is not intended to offer investment advice and readers are strongly recommended to take professional advice before trading and remember that crypto currencies are extremely volatile

Recently, there has been a downward trend in the cryptocurrency market. According to CoinMarketCap, the value of the cryptocurrency market declined by 11.8% in a 24 hour period. This price crash culminated in a loss of over $350 billion in one day. Bitcoin and Ethereum, the two top digital assets by market cap, have each witnessed over 40% decline in price. This massive drop is coming barely two months after the market value of the cryptocurrency market increased to $2.94 trillion following Bitcoin’s rise to an all-time high of approximately $69,000 in November 2021. In recent days, the price of Bitcoin has fluctuated around the $40,000 mark.

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Source: Bloomberg

As of 22nd January 2022, Bitcoin price was $34,015 and Ethereum at $2,300. This means that a $1,000 investment made at the peak would be worth less than $500 at the moment. This is a massive drop and a heartbreak for cryptocurrency investors. Other cryptocurrencies are not spared - when Bitcoin dips, altcoins fall harder. For example, Solana and Cardano have both been over 20% down in the last 24hours. Meme coins are equally affected; Dogecoin was down over 10% and Shiba Inu declined more than 13%.




Source: Coindesk

It is not only the cryptocurrency market, since other riskier assets are also taking a big hit - NASDAQ and the S&P 500 have suffered losses as well. Cryptocurrencies and technology equities  have been declining at the same time this month, showing an increasing correlation between the two. 

In 2019, China - one of the world’s largest cryptocurrency markets - officially banned trading of cryptocurrency. However, trading continued online through foreign exchanges. In 2021, China’s central bank announced that all cryptocurrency transactions be illegal, and effectively banned digital tokens such as Bitcoin. This created a great negative impact on the cryptocurrency market. Furthermore, there has been concern over the potential for more cryptocurrency regulation in the U.S., as well as how the Federal Reserve (potentially dialling back its monetary policy) would impact the crypto market. The cryptocurrency space is experiencing additional pressure after Russia’s central bank proposed to ban all cryptocurrency operations in the country. According to the central bank, cryptocurrency acts as a threat to financial stability and its monetary policy sovereignty and was one of the biggest blows to the crypto world after China’s ban. Undoubtedly, this negative effect is to be expected since Russia is one of the top three Bitcoin mining countries in the world. Globally, other regulators are focusing on cryptocurrency markets as well. 


For Bitcoin, dip isn’t unusual; cryptocurrencies are volatile and fluctuate from time to time. As rapidly as prices rise, they can tumble back down. For instance, Bitcoin went as high as above $64,000 in April 2021, but three months later, the cryptocurrency had lost more than half its value, diving to below $30,000. Following this, it hit an all-time high at nearly $69,000 in November 2021 and now it has plummeted by more than 50%. Earlier this month, some analysts predicted that the crypto market will go ‘bullish’ and hit $100,000 by May. However, there are recent predictions that show a possible drop below $30,000 and the probability of even hitting $27,000 mark. Whichever way the market goes, there are things you need to know as a trader or investor:

  • stay calm

  • assess the situation

  • remember that volatility is the name of the game

  • evaluate the future

  • determine how to act

The volatile nature of cryptocurrency attracts traders looking to make a profit but it is nail-biting, especially for new investors. Because of this, it is important to consider if you can actually handle the fluctuation before investing in Bitcoin or any other cryptocurrency. Emotional stability is fundamental; some people rather believe it is safer not to allow your emotion to come into play when trading cryptocurrency. However, humans are humans. Regardless of your tolerance level, it is advisable to only invest the amount of money that you can afford to lose. For cryptocurrency ‘hodlers’ the last two months have been quite the test of endurance.