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3 wildest theories explaining $500B crypto market crash

The crypto market lost over $500 billion in combined market capitalization earlier Friday. The market bloodbath led to over $700 million in liquidation as top crypto assets bled heavily. Bitcoin (BTC) fell below the critical support level of $40K while Ether (ETH) also lost $3K support.At a time when crypto proponents are debating whether the crypto market has entered a bear phase, many wild theories flooded the internet to make sense of the crash. We will look at three such theories that many believe fueled the crypto market crash.U.S. Fed’s inflation measures:The consumer inflation in the United States has hit record highs, and the upcoming FOMC meeting set for 25-26 January is expected to announce new interest rates. Fed is expected to raise interest rates thrice this year with hikes going from 0.25% to as high as 1% by EOY. Many market pundits believe the growing concern around inflation added with the omicron rise has led to sell-off on Wall Street, which eventually trickled down to the crypto market.One Reddit theory suggests crypto was created to hide asset inflation as it created another “pipeline” for the U.S. dollar to pass through to inflate a different asset. The user Juicyjuicejuic wrote:“Crypto creates the perfect trading vehicle for a short time, before becoming the scapegoat for whatever crash is coming.”The user went on to add that the volatility in the crypto market is the reason behind “why bonds and stocks are crashing because everybody gambled on crypto and took money out of other assets to do so!”Bitcoin market’s growing correlation with Wall StreetMarket pundits also believe the growing correlation of Bitcoin with the equity market could have fueled the crash earlier. Because of ETFs and institutional investors, BTC has become more intertwined with the equity markets. The cryptocurrency market has been swaying in lockstep with Wall Street.Related: Bitcoin dumps to hit six-month lows near $38KRussian central bank crypto blanket ban proposalAnother theory that seems to have gained traction is a recent report from the central bank of Russia demanding a blanket ban on crypto mining and trading. As Cointelegraph reported, the Russian central bank compared Bitcoin to a Pyramid scheme and demanded an immediate ban on its use domestically. The central bank also warned crypto could pose a risk to the financial sovereignty of the nation.Russia became the third largest Bitcoin mining hub, and many believe the central bank’s demand for a blanket ban has triggered May 2021 like FUD in the market-leading to sell off.The first major crash of 2022 has set a selling spree in the crypto market, however, veteran traders continue to advocate for hodling as they claim a crash of up to 30% is not worrisome in a bull market.

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New research expects a gloomy year for Bitcoin as DeFi and DAOs rise

Another major player in the cryptocurrency world is forecasting a dismal year for Bitcoin (BTC) in 2022. Following the Federal Reserve’s and other central banks’ tightening of liquidity measures, Huobi Research believes that BTC will enter a bear market. On the brighter side, decentralized finance (DeFi) will continue to expand and adapt, with DAO governance eventually becoming a major driver of activity on the chain.Bitcoin and Ether (ETH) prices plummeted on Thursday night on the cryptocurrency market, shedding about $150 billion from the market. Over the last 24 hours, Bitcoin has lost roughly 7.9% of its value to as low as $38,788 at the time of writing.2021 was a watershed year for crypto, with industry growth reaching new heights. DeFi, nonfungible tokens (NFTs), cryptocurrency adoption, blockchain usage and other factions all had big years. Blockchain technology has also been brought to the forefront via Web3 and the metaverse. Regulators are also catching up, with 40 nations having established over 150 distinct rules for cryptocurrency according to the Global Crypto Industry Overview and Trends report published by Huobi Research in collaboration with Blockchain Association Singapore.While several of these industries will continue to develop this year, it may be a challenging year for BTC. According to Huobi’s analysis, the U.S. Fed has started to taper, which indicates that dollar liquidity is losing its return. In 2013, the Fed took a similar step that was followed by a two-year bear market. While the market has changed dramatically and there is far more liquidity and BTC holders, Huobi believes another such move could be on the cards.Despite the gloomy forecast for BTC, Huobi believes that the wider industry will see significant development in other sectors. DeFi is one of these, a market that rose from $19 billion in Jan. 2021 to a high of $250 billion in total value locked at year’s end. We’ll witness DeFi 2.0 enter the scene in 2022, as per the Huobi report.Related: 3 key metrics show DeFi’s TVL on the verge of a new ATHAccording to Huobi, DAOs will also become a powerful on-chain governance mechanism.  The report highlights that the demand for DAO governance and the funds DAOs manage will increase in the future. The management of DAO funds may link with various DeFi applications, allowing treasury management.

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Bitcoin $100K possible by chipping away at gold’s market share: Goldman Sachs

Bitcoin (BTC) failed to close 2021 above the long-expected $100,000 level, but experts believe the psychological horizon is still achievable by taking gold’s market share, albeit over a more extended period.In a note released to investors on Tuesday, Goldman Sachs co-head of global FX and EM strategy Zach Pandl hypothesized that if the largest cryptocurrency could overtake 50% of the store of value market share over the next five years, BTC price would increase to just over $100,000, marking a compound annualized return of 18%.While the current market cap of BTC is close to $884 billion, Goldman Sachs estimates the float-adjusted market cap of Bitcoin is under $700 billion, accounting for one-fifth of the “store of value” market. The said market is not crowded, though. The only other participant of Goldman’s store of value market is gold, with an available investment at $2.6 trillion.Despite its ups and downs, Bitcoin still managed to top Goldman Sachs’ 2021 return scorecard with over 60% yearly returns. Gold is placed at the bottom in the same chart with a 4% yearly loss.Yearly returns scorecard. Source: Goldman Sachs Global Investment ResearchRelated: Wait-and-see approach: 3/4 of Bitcoin supply now illiquidGoldman Sachs experts believe that the demand for BTC will not be harmed by the hot debate surrounding the Bitcoin network’s energy consumption. While a recent study claims the Bitcoin ecosystem consumes eight times the energy of Google and Facebook combined, New York Digital Investment Group estimates that Bitcoin mining will not represent more than 0.4% of global electricity consumption over the next decade.As detailed in a Cointelegraph New Year Special, Bitcoin saw a bumpy ride over the last year. Many experts believed that $100,000 was an easy target for the flagship cryptocurrency for 2021. However, BTC closed the year around $47,000 after touching an all-time high around $69,000 in November, falling short of analysts’ ambitious target.

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Only a paper moon: Bitcoin price briefly shows $870B on CoinMarketCap

Crypto traders experienced a moment of joy, followed by confusion, when a glitch caused several data aggregators to briefly display enormous gains for Bitcoin (BTC), Ether (ETH) and other cryptocurrencies.CoinMarketCap and several other price indexes showed Bitcoin’s price closing to $900 billion as ETH showed over $81 billion. The momentary glitch also impacted Cointelegraph’s price indexes. Hey @CoinMarketCap, you doing ok there buddy? pic.twitter.com/WfXwpSmURU— Cointelegraph (@Cointelegraph) December 14, 2021Displayed numbers didn’t affect the trading prices on exchanges, and the platforms quickly solved the issue. CoinMarketCap explained on Twitter that the data provider is rebooting its servers as part of the remediation plan.“CoinMarketCap is now back to normal after an issue that affected our price rankings,” a spokesperson told Cointelegraph, adding that the investigation on the root cause of the glitch is still ongoing:“And no, we didn’t show you prices from 2026. We’d hold on that Lambo downpayment.”Crypto Twitter was quick to react to the unrealistic price movement with hilarious posts: pic.twitter.com/xircZlbHNh— khalil (@Zen_Eustass) December 14, 2021

Initial speculation was that hackers caused the displayed prices:ME after checking that #CoinMarketCap was hacked and the prices were all fake. pic.twitter.com/5cyS5iw4Y5— Muttley Investor (@MuttleyInvesti1) December 14, 2021

“Everyone tunes into those disruptions, so to the extent they all use the same data source,” Bosonic founder Rosario Ingargiola explained, continuing, “So when there’s a problem and prices are really off, that can create herd behavior to drive investment decisions.”

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