2022 has been a challenging year for cryptocurrency. The market slid from its peak of $300 trillion to $800 billion in the span of one year, and the majority of top-performing cryptocurrencies are experiencing large losses, causing investors to sell rapidly. Bitcoin skyrocketed to an all-time high of $69,000 in November 2021, but fell to $47,000 in January 2022, and is now trading for only $18,000 post FTX downfall.

The entirety of the cryptocurrency market has continued to plunge and shows no signs of slowing down. FTT— the backbone of Futures Exchange (FTX), a bankrupt company that formerly operated a cryptocurrency exchange and crypto hedge fund—hit rock bottom when FTX went bankrupt due to poor management, inexperienced leaders,  and accusations of fraud. Last seen at $26 on September 1st, the currency is now trading below $1. Solana hit $37 over November 2022. It now trades at an all-time low of less than $12. Other currencies, such as Filecoin, Storj, Decetraland, Apecoin, and Flow, have plummeted by an average of 20–40% since November 2022.

Bitcoin and Ethereum, the two biggest cryptocurrencies by trading volume, have experienced significant devaluation after the FTX crash. But why exactly is cryptocurrency so volatile? Unlike other investments, such as company shares, in which price depends on the success of a company, Bitcoin and other cryptocurrencies have no underlying assets. This means that the movements in price are based purely on speculation between investors as to whether or not the currency will rise or fall in the future. As a result, there can be extreme swings in price in a short span of time.

Today, high inflation and the rapidly increasing cost of living are causing people to reduce their investment risks by selling their coins. Freshman Umang Sharma explained, “The federal government raised interest, causing crypto to lose its value. Furthermore, people are losing trust in the electronic currency after the FTX scandal.”

Currently, it is recommended by former investors to invest money into something that they understand and is completely regulated by the government. After the FTX scandal, it is vital for investors to buy currency with caution and only purchase a share after thorough research. With growing uncertainty concerning the crypto market, it is important to view the market’s moves more cautiously. Now is an optimal time to observe the nuts and bolts of the cryptocurrency market in great detail and avoid making any impulsive financial decisions.