Nobody expected that 2022 would be such a controversial year for cryptocurrencies. Nevertheless, the collapse came, and Invest in Bitcoin, two digital currencies were affected, Terra Luna and its stable coin Terra USD.
The complicated situation in terms of external factors surrounding the digital market that, without being produced initially by it, are wreaking havoc on the development of cryptocurrencies, which have decreased in value by more than 50% of the matter at the beginning of the year.
The investment alert alarms were activated automatically when this currency’s price decreased by almost 100%, which caused panic among the followers of this currency since they had their investments in this currency overnight. As a result, the next day, they went bankrupt.
Given this situation, a massive sale of crypto assets contributed to a more significant fall in the digital financial market.
It is a situation that escapes from the hands of any investor. The effects can be diverse, which is why in this type of situation, the need arises in many to create a regulatory framework that, in a certain way, supports and security for their investors.
But these regulations in which financial entities or governments could be involved a break with the principle of creating digital currencies, which is the ability to be decentralized.
Circumstances in which the “CryptoCrash” occurs
A quite shocking economic and financial environment where the need for a change in the trend of digital currencies is necessary, but nothing around it contributes to this objective.
After months of evaluation and various forecasts, many specialists point out that crypto winter is approaching, and cryptocurrency investors must prepare for a more substantial situation in terms of falling prices and supply and demand of this market.
Although for many other followers of digital currencies, it is the best time to acquire cryptocurrencies since an upward trend is coming, demonstrating that the cycles of the digital market are constantly fulfilled.
The fall of Terra Luna has been compared to the fall of the American corporation with a tremendous financial trajectory, such as Lehman Brothers, which positioned itself among the four primary financial entities in the United States after the financial crisis of 2008 fell into bankruptcy.
When a market is as vulnerable as the one we are witnessing at this point in the year 2022, all digital assets, both traditional and digital, suffer the effects of an economic crisis that joins the War between Ukraine and Russia.
The current situation can be compared to the domino effect because when a digital currency falls, it impacts all the others. However, stablecoins have their value referred to in the dollar value; this pair is not proving anything positive since the dollar is also being affected by this financial crisis.
Currently, panic is invading crypto investors; a situation that does not benefit the financial market since investments in this digital asset is usually hazardous.
More regulations for digital currencies
Given the resounding fall that Terra Luna had, a group of countries gathered in Germany, among which are known as the G7 (Germany, Canada, the United States, France, Italy, Japan, and the United Kingdom), have proposed the creation of a global regulatory framework for digital currencies.
It was to be expected that in such an alarming situation, governments would not let the millionaire losses of many users go by.
The pronouncements of the financial entities have not stopped the Federal Reserve (Fed) and the Securities and Exchange Commission (SEC) of the United States. On the contrary, these institutions are genuinely concerned with digital currencies’ complicated scenario.
Although no mediation has been published, it is still being stipulated to establish a document temporarily to be modified according to the uses and needs of crypto investors.
Cryptocurrencies in recent years have taken more life in the financial sector, which for many can represent a threat to the traditional financial market since they offer many benefits and innovations.
The global economy, from the oil negotiations to the rise in prices of goods and services in the United States, is affecting the financial market and, in turn, the digital ecosystem.
Little by little, many countries have joined the proposal to legalize digital currencies as financial tools, which is quite positive, but as long as their financial nature is not affected.
Conclusion
Bitcoin is the currency that leads cryptocurrencies, so there may be emerging digital currencies in which many have invested. Still, evaluating the tools chosen to avoid this type of loss is essential, such as with TERRA LUNA.
