19 Feb 2025

light mode

Why cryptocurrencies are experiencing a decline

Why cryptocurrencies are experiencing a decline

In 2022, another cryptocurrency crash happened. Bitcoin fell from all-time high of $69,000 to $20,000, and BTC market capitalization dropped from $3 trillion to $986 billion. Let’s look at the main factors that cause

On this page

The price of digital assets is subject to a sharp change in market sentiment (sometimes buyers control and drive prices higher, sometimes sellers dominate, sometimes panic and fear influence, and sometimes greed and euphoria can contribute to investors bidding up assets). As a result, Bitcoin and other cryptocurrencies may experience strong price fluctuations even in 5-minute intervals. 

Moreover, if assets reach their peak, they become overbought, which means that there is a strong possibility of a correction to a more realistic level of price in the near future.

Global drivers of crypto decline

In addition to the dependence of cryptocurrencies on the sentiments of investors and traders, as well as the pullback at the maximum, there are macroeconomic trends that cause the decline of crypto prices.

For example, war, inflation, the Fed's interest rate increase, recession – all of these negatively affect the stock and crypto markets.

As the US Federal Reserve increases interest rates in order to try to control inflation, many investors are selling off cryptocurrencies to cut spending. During times of economic imbalance and uncertainty, people prefer to avoid investing in risky assets.

Meaning, the crypto market is experiencing the same stresses as the global economy, which provokes a decline. While the economy has no signs of recovery, there is no need to talk about the growth of BTC.

Bear market chart

Bear market chart

Reasons of crypto decline within the sector

In addition to the external factors of the crypto crash, there are some other reasons related exclusively to the crypto industry. For example, the bankruptcy of core companies, fraud, hacks, breaking promises to the community.  In June 2022, crypto decline was caused by the announcement from the crypto-lending company Celsius Network. They wrote about freezing funds and transfers due to “extreme” market conditions. The platform later declared bankruptcy along with other major cryptocurrency companies. Against this backdrop, the crypto market value fell below $1 trillion for the first time since January 2021.

Panic in the market led to sudden and severe sell-offs in major assets as user confidence was eroded, causing the crypto prices to drop actively.

Overall, Bitcoin fell from $60,000 in late 2021 to $20,000 in 2022, and ETH price dropped to $995 (the highest price was $4,000).

Regulators' actions

Another reason for pessimism in the market, which periodically causes the fall of crypto prices, is the fact that many government regulators and authorities do not consider crypto to be legal tender.

Government officials are skeptical of the new technology and see it as a threat to monetary policy, security and the environment. We can recall China's aggressive attitude towards digital assets. In 2021, the PRC declared cryptocurrency transactions illegal and banned mining. That led to a drop in prices and network hashrate.

Digital currencies are a relatively new technology, so it is impossible to fully assess their impact on the global economy. Cryptocurrencies are volatile, they react sharply to panic market sentiment, so negative events quickly lead to price drops.

However, for experienced crypto investors a dramatic crash of prices is nothing new. For example, in 2018, BTC fell to $3,500 from the previous all-time high of $20,000. 

The content on The Coinomist is for informational purposes only and should not be interpreted as financial advice. While we strive to provide accurate and up-to-date information, we do not guarantee the accuracy, completeness, or reliability of any content. Neither we accept liability for any errors or omissions in the information provided or for any financial losses incurred as a result of relying on this information. Actions based on this content are at your own risk. Always do your own research and consult a professional. See our Terms, Privacy Policy, and Disclaimers for more details.

Articles by this author
MEMX Files for SEC Approval to List XRP ETF from 21Shares

MEMX Files for SEC Approval to List XRP ETF from 21Shares

The U.S. market is seeing a wave of altcoin ETF applications, and MEMX is the latest player to join in. The exchange has filed a request with the SEC to approve the listing of the XRP ETF introduced by 21Shares, a major name in crypto investment products.

The Coinomist
Bitcoin Bull Run Is Just Starting as Institutions Buy In

Bitcoin Bull Run Is Just Starting as Institutions Buy In

A recent Bernstein report suggests that Bitcoin could soon see strong upward momentum, driven by increasing institutional investments.

Anton Kryshtal
Mystery Coder Burns $7M in ETH—Calls Out Brain-Tech ‘Weapons’

Mystery Coder Burns $7M in ETH—Calls Out Brain-Tech ‘Weapons’

A mysterious figure, Hu Lezhi, has publicly burned millions in ETH, alleging the existence of an underground organization manipulating human consciousness.

Anton Kryshtal
Lawmaker Attacks Trump’s Meme Coin, Musk’s DOGE

Lawmaker Attacks Trump’s Meme Coin, Musk’s DOGE

Democratic Congresswoman Ayanna Pressley has criticized the DOGE agency and Trump’s meme coin, arguing they represent a dangerous shift in financial oversight.

Anton Kryshtal
Weekly Analysis of BTC, ETH, and the Stock Market (Feb 18, 2025)

Weekly Analysis of BTC, ETH, and the Stock Market (Feb 18, 2025)

An overview of BTC, ETH, XAUT, and S&P500 charts, and the current cryptocurrency market dynamics.

Artem Khomenko
Weekly Analysis of BTC, ETH, and the Stock Market (Feb 10, 2025)

Weekly Analysis of BTC, ETH, and the Stock Market (Feb 10, 2025)

An overview of BTC, ETH, XAUT, and S&P500 charts, and the current cryptocurrency market dynamics.

Artem Khomenko
Weekly Analysis of BTC, ETH, and the Stock Market (Feb 3, 2025)

Weekly Analysis of BTC, ETH, and the Stock Market (Feb 3, 2025)

An overview of BTC, ETH, XAUT, and S&P500 charts, and the current cryptocurrency market dynamics.

Artem Khomenko
How to Bump a Transaction in the Bitcoin Network

How to Bump a Transaction in the Bitcoin Network

Sometimes, Bitcoin transactions can get “stuck,” especially if a low fee was set. In such cases, you might wonder: Why is my Bitcoin transaction stuck?

bitOn
Inside Cryptocurrency Farms: How Digital Coins Are Mined

Inside Cryptocurrency Farms: How Digital Coins Are Mined

Cryptocurrency farms and mining have evolved significantly since Bitcoin launched in 2009. To understand their growth, it helps to look at the broader history of resource extraction.

The Coinomist
From Bulls to Ballers — Why Celebrities Are Flocking to Crypto

From Bulls to Ballers — Why Celebrities Are Flocking to Crypto

Trump’s meme coin isn’t an outlier—it’s part of a broader trend. Back in 2021, celebrities were minting NFTs, and by 2024, they had moved on to personal token launches. The connection between fame and crypto has been growing for years, even if many failed to see it.

Vlad Vovk
Which Macroeconomic Factors Make Crypto Rise or Fall? 

Which Macroeconomic Factors Make Crypto Rise or Fall? 

It happens when you check the market and crypto prices are up or down for no obvious reason. Then you do some research and find out that there are actually reasons outside the crypto space.

Anahit Avetisyan
How Blockchain Helps Combat Disinformation

How Blockchain Helps Combat Disinformation

Fake news has become a global issue, shaping public opinion, fueling social tensions, and even influencing political decisions. With the rise of social media, the spread of misinformation has accelerated, making it increasingly difficult to regulate. However, blockchain technology offers a promising solution in the fight against fake news.

Daryna Nesterenko
Trading Psychology: How to Avoid Falling Victim to Your Own Biases

Trading Psychology: How to Avoid Falling Victim to Your Own Biases

The most successful traders aren’t always the smartest. More often, those who excel are the ones who understand psychological traps, manage their emotions, and maintain rationality under pressure.

Vlad Vovk
Pantera’s Tax Probe: A Wake-Up Call for Crypto Investors

Pantera’s Tax Probe: A Wake-Up Call for Crypto Investors

Dan Morehead, the founder of Pantera Capital, is under investigation by the US Senate Finance Committee (SFC) over $850 million in crypto profits. The key issue is whether he avoided U.S. taxes by moving to Puerto Rico, a well-known tax haven for crypto investors.

Anahit Avetisyan
The Bitcoin Kid’s 2011 Prediction – How Right Was He? 

The Bitcoin Kid’s 2011 Prediction – How Right Was He? 

In May 2011, an unusual video surfaced on YouTube. A 12-year-old boy explained Bitcoin – how it works and what its future might hold.

Anahit Avetisyan
MORE
«Mass Adoption Isn’t About Tech – It’s About Perception». Bitmedia Founder Matvii Diadkov – About RWA, Web3, And Marketing

«Mass Adoption Isn’t About Tech – It’s About Perception». Bitmedia Founder Matvii Diadkov – About RWA, Web3, And Marketing

Matvii Diadkov, founder of Bitmedia, shared with us in an exclusive interview his expert insights on Web3 adoption, impact of GameFi and community-centering tendencies in the market.

The Coinomist
“Satoshi is CIA”: Swedish crypto bro opens up about his Bitcoin journey

“Satoshi is CIA”: Swedish crypto bro opens up about his Bitcoin journey

The first crypto craze took place almost a decade ago. Overnight, many people found out about Bitcoin and its underlying technology, blockchain.

Lesia Dubenko
MORE