Statistics show that most digital currencies have had a rough start since January. Incidentally, this dip comes in contrast to the all-time record-breaking streaks that different cryptocurrencies had last November. Until last Thursday, Bitcoin and Ether dipped by 23.3 percent and 36.9 percent, respectively, joined by most alternative cryptocurrencies.
Moreover, Total Assets under Management (AUM) figures for all OTC-traded products and aggregate exchange saw a drop to $43.9 billion last month. That means a 25.1% dip compared to last December, going further below the $74.7 billion high seen last October.
With some analysts tagging the season a “cryptocurrency winter,” Ethereum and Bitcoin’s AUM fell by 29.2% and 23.3%, respectively. Expectedly, the average daily trading volume also saw a dip last month, losing 14.5% to $481 million. Per individual currencies, Ethereum products and VETH saw the biggest fall, reducing by 34.8% ($139 million) and 38.9% ($3.91 million), respectively.
More data on the performance of cryptocurrencies last month depict it’s the first month since August to experience average weekly outflows. January 2022 saw weekly outflows of up to $88 million, with a record $207 million outflows in its opening week. The last time the market experienced anything more was in June’s opening week ($238 million). Reports hold inflation in the US responsible.
Reasons for the Crash; What’s to Expect Ahead?
Pundits, analysts, and market observers have posed different theories explaining the crash in crypto trading volume in January 2022.
One highlighted contributing factor for the declining investor interest is the raging coronavirus Omicron variant. It’s likely that concerns regarding lockdowns, travel restrictions, and changing workplace conditions are responsible for reduced spending and panic-selling.
Elsewhere, the Internet shutdown in Kazakhstan, the second-largest contributor to bitcoin mining, on January 5 also appears culpable. Its government had shut down the Internet following violent protests against fuel price hikes.
Other reasons include China’s cryptocurrency ban and the extreme caution of other governments and international organizations regarding digital assets.
However, the fall in trading volume is no reason for worry, with digital currency bearing a well-known tag of volatility. Last year started poorer but turned out outstanding, with most digital coins seeing massive growth. There’s currently no reason for 2022 to be any different.
