Total Crypto Market Cap Drops Below $1 Trillion: Here's What's Causing the Crash

Bitcoin dropped to nearly $21,000 (roughly Rs. 16.3 lakh) on Tuesday morning as the wider cryptocurrency market continues to fall, taking the total market cap of all cryptocurrencies to levels not seen since February 2021, nearly 18 months ago — a drop of around 68 percent from its all-time high of approximately $3 trillion (roughly Rs. 2,33,04,815 crore) last November. The largest cryptocurrency by market value is trading at about $23,489 (roughly Rs. 17.6 lakh), down 27 percent in the last seven days, according to CoinGecko.

The immediate trigger seems mainly tied to macroeconomic developments. Things began spiraling towards a big dip after the US government's Bureau of Labor Statistics released monthly inflation data from the consumer price index (CPI) on Friday, showing an 8.6 percent year-over-year increase in May. That was higher than Wall Street consensus estimates and marked a new 40-year-plus peak.

In addition, fear struck the market after the Terra ecosystem collapse, with failed algorithmic stablecoin TerraUSD (UST) and cryptocurrency LUNA (LUNC) becoming nearly worthless last month. On Sunday, further chaos ensued after cryptocurrency lending platform Celsius paused all withdrawals, swaps, and transfers between accounts.

Investors are also continuing to stay away from riskier assets — a sentiment which has resounded in the traditional stock market world as well.

“There are chances that BTC may further fall up to $20,000 (roughly Rs. 15.5 lakh). Nevertheless, at current prices, it's a great entry opportunity for long-term investors. They may look at entering in 3-5 tranches over the next 2 quarters.

Cryptocurrencies are here to stay as they've proven their mettle time and again, despite numerous crackdowns, bans and tighter regulations over the last decade.

"I see the total market cap of crypto market crossing $10 trillion (roughly Rs. 7,76,82,715 crore) within the next 5 years. However, regardless of high potential returns, cryptocurrencies are highly volatile and risky asset classes. Hence, investors shouldn't allocate more than 5-10 percent of their savings into the same” says Khaleelulla Baig, co-founder and CEO of thematic crypto investment platform, Koinbasket in a statement shared with Gadgets 360.

Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks. The information provided in the article is not intended to be and does not constitute financial advice, trading advice or any other advice or recommendation of any sort offered or endorsed by NDTV. NDTV shall not be responsible for any loss arising from any investment based on any perceived recommendation, forecast or any other information contained in the article.