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24-05-2022|Crypto

In just six months, more than $1 trillion in cryptocurrency vanished.

Traders' flight from riskier assets has cut the price of bitcoin and other cryptocurrencies in half since November, wiping away more than $1 trillion in digital currency.

Even seasoned investors were left reeling as bitcoin plummeted 29 percent over a seven-day losing streak that recently concluded as a stablecoin—a portion of the crypto world that boasted about its stability—unexpectedly crashed.

Investors are reacting to rising interest rates and rising inflation by selling riskier assets as the financial markets reach a tipping point.

It's been a tumultuous voyage into the depths of crypto.

After years of being regarded as a fringe, speculative product, cryptocurrencies took off last year and appeared to gain more credibility. Tesla Inc. TSLA 1.66 percent said that it has purchased $1.5 billion in bitcoin, causing prices to rise. In the first major bitcoin-focused public offering, Coinbase Global Inc. COIN -0.08% floated its shares.

Bitcoin and Ethereum, two of the most popular cryptocurrencies, hit all-time highs in November. At 5 p.m. on Nov. 9, bitcoin was worth $67,802.30, while ethereum was at $4,800. They are currently down 58% and 60%, respectively, from their previous highs.

Even before this week, cryptocurrency prices were plummeting due to sky-high inflation. The use of Bitcoin and other digital currencies as inflation hedges has been discussed. However, the ripple effect has been different. The Federal Reserve is raising interest rates quicker due to rising inflation, which investors worry will hamper economic growth. As a result, riskier assets, such as cryptocurrency, are being sold by investors.

Exacerbating the losses is the fact that crypto trading, which was once dominated by individual investors, is now dominated by institutional investors such as hedge funds. Those looking for diversification in crypto have been caught off guard.

Individual and institutional investors have been bailing out as the price has dropped. Coinbase acknowledged that it is losing users when it released its first-quarter numbers late Tuesday. Coinbase's shares had fallen 82 percent since its debut day of trade just over a year ago by the end of trading on Thursday.

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