Bitcoin and Crypto crashed - Here is why?

Welcome to ChainDecoded —Your guide to the world of Web3, Crypto and Blockchain. You will receive one email every Thursday with various news, concepts and facts going on in this week.

This week, all the crypto coins crashed.

"Bitcoin tends to lead the crypto market - if BTC goes up, the rest of the market often follows."

Well, same goes for when Bitcoin prices decrease.

And yesterday morning, that theory was proven out in real time.

Every non-stablecoin in the crypto top 5 had its price fall off a cliff around the same time.

Why this happened?

The folks at the SEC responsible for approving the ETF are mostly democrats → some democrats don't like crypto → therefore they won't approve a BTC ETF.

It's a fragile argument at best.

But the market took it to heart and sold off a bunch of Bitcoin, creating a knock-on effect that went something like this:

1. A bunch of folks were convinced BTC would go up in price...

2. So they took out loans (aka 'took on leverage') to buy more Bitcoin...

3. When BTC dipped, their lenders forced them to sell and repay the loans...

4. This sell pressure pushed BTC prices even lower, which caused more forced sales, which pushed the price lower, till everything bottomed out...

And as folks sold their Bitcoin, they also sold off many of the other major coins/tokens they were holding.

Why? Cause we've all bought into the idea we lead with at the top:

"If BTC goes up/down, the rest of the market often follows."

And now it's a weird self fulfilling prophecy...

Video to understand Web3

Read further about the same at https://hbr.org/2022/05/what-is-web3

Tweet of the week

This week, @vitalik.eth, the creator for Ethereum chain published the roadmap for 2024 which was received by the community very well.

Stay tuned for new stories and news update from the crypto and blockchain world.