What Caused the Crypto Crash?

The crypto crash continues as new lows are reached, and panic continues. The question lingers: what caused the crypto crash?

There are so many factors, but we’re going to focus on the main causes of the downturn. We’re going to look at both fundamental factors and media factors and what you can do to prepare for the next bull market.

Read on for a full guide on the crypto crash and the effect it could have on your investments.

Investors Taking Profits From Their Positions

Many crypto investors create positions with the expectation of quick gains, but when things don’t turn out as planned, they may take their profits and exit the market.

This can cause a crash, as those investors who are still holding become nervous and start aggressively selling in order to limit their losses.

When the sell-off is greater than the demand, prices can fall quickly, resulting in a crash.

High Fees for Transactions

High fees for transactions are a common cause of the crypto falling. This happened in the early days of cryptocurrency when transactions could become very costly, and users could not access certain services because of their exorbitant fees.

These fees were often too high for traders who, as a result, stopped trading and opted for other forms of currency.

As a consequence, the demand for cryptocurrencies decreased, resulting in a dramatic decrease in their price and a crash in the market.

Failing to Pick the Right Location

Failing to pick the right location for a crypto platform can be one of the major causes of a crypto crash. If crypto companies do not pay attention to where and how they launch their operations, it can cost them.

There are various considerations to take before you find a location, such as the country’s legal framework, access to capital, convenience and availability, costs and taxes, and simplifying taxation processes.

Different countries have different rules and regulations for cryptocurrencies, so it is important for companies to understand the legal and taxation framework before launching their operations.

Environmental and Governance Implications

In terms of the environment, the crash has exacerbated the global carbon footprint, as the large amount of energy consumed for mining—used to ensure the system remains secure—has increased exponentially.

This high energy usage has been linked to the collapse of cryptocurrency prices as miners become less profitable. Additionally, the market downturn has caused a decrease in computing power, raising fears of a 51% attack.

In terms of governance, the crash has raised concerns about the project’s reliability and credibility, as investors and communities alike have been left uncertain about the future of their investments.

These worries have further been amplified by the fact that many cryptocurrency projects lack legal, regulatory, and governance protections, leaving users exposed and unprotected.

As a result, the crypto crash has greatly impacted both the environment and governance, leaving numerous consequences in its wake.


The crypto crash has been caused by a multitude of factors, leading to increased uncertainty. The most significant of these is the increase in market regulations, as well as an overall lack of market liquidity.

This has caused investors to become hesitant in making long-term investments in the sector, as the legal ramifications of buying into an unregulated asset are hard to predict.

Additionally, the extremely volatile nature of the market has caused investors to seek alternative forms of wealth accumulation.

Finally, the influx of new investors entering the sector has caused a sort of market saturation, as more supply of cryptocurrencies has led to reduced values and increased uncertainty.

All of these factors, working in tandem, have led to the crypto crash.


Crypto crash is caused by many factors; one of the most common is doubt. Doubt can be sparked by a variety of causes, such as external news, internal market manipulations, and macroeconomic events.

Many investors doubt the security of cryptocurrencies and their underlying blockchain technology. Doubts about the future of cryptocurrency markets can cause investors to withdraw their funds, resulting in a crypto crash.

Additionally, massive sell-offs can cause prices to drop rapidly and increase investor doubt.

Regulators’ efforts to crack down on illegal activities within the crypto markets are also frequently blamed for crypto crashes, as they can scare off investors who question its legitimacy.

In the end, the fact remains that doubts can create a cycle of distrust, panic selling, and crypto crashes.


Greed is one of the primary causes of the Crypto crash. Greed causes investors to take excessive risks in the hope of making a big profit while ignoring the potential risks.

This can often lead to investors taking risks they can’t afford or buying into projects because they believe it is a ‘sure thing.’

Greed can also lead to investors pouring into questionable projects as they try and ‘make a quick buck’ before others jump on the bandwagon. This can cause the market to become overvalued and lead to a crash.

Furthermore, greed can lead to market manipulation, such as pump-n-dumps and massive market sell-offs, when investors swoop in to make a quick buck from the market movements.

All these factors contribute to the volatility in the Crypto market and can lead to a crash.

Manipulation by Whales

Manipulation by Whales is also one of the common causes of cryptocurrency crashes, and they take advantage of the less informed or inexperienced traders.

By utilizing their large capital to buy or sell large amounts of crypto coins on exchanges, they are able to artificially inflate or deflate the prices, which leads to crypto crashes.

Along with their manipulation, whales can also impact the market by spreading rumors and fake news about the coins. This can have a detrimental effect on the price of the coin and lead to a large crash in the crypto market.

While the manipulation of whales is a regular occurrence in the crypto market, traders should always be sure to have an in-depth understanding of the coins they are investing in before making any decisions.

Security Breaches

Security Breaches can occur when unauthorized users gain access to a crypto platform or to crypto wallets. This can lead to large-scale theft of crypto coins or tokens.

Cybercriminals can also target a crypto platform and manipulate its code to perform a double-spend attack or DDoS attack that shuts down the platform and the currencies it supports.

As a result, users and investors of the affected crypto platform can suffer from significant losses, and this can lead to a crypto crash. Security Breaches often result in panic selling of crypto coins as users and investors try to get out before the price plummets.

For this reason, it is extremely important that users and investors take the necessary steps to secure their crypto accounts and wallets and pay attention to the news and events surrounding the crypto markets to avoid being blindsided by these disasters.


In the case of Decentralized, it is without a dedicated leader or centralized authority figure. Decentralization can lead to increased volatility in cryptocurrencies, with prices and markets ever-changing, making them vulnerable to price crashes.

This can be caused by a lack of unified regulation and enforcement, which leaves the market vulnerable to a lack of liquidity, speculation, and market manipulation.

Additionally, decentralized crypto projects are more prone to security issues and may not be able to respond quickly to technical problems and hacks, leading to reduced confidence and trust in the project.

This can contribute to a crypto crash as traders move to other currencies.

Trading Errors

The crypto market is a high-risk environment that is prone to market volatility, and prices can quickly drop. As such, a trading error can cause a crypto crash.

Trading errors can involve mistakes such as typing the wrong numbers in trades, failing to place a stop-loss, and putting too much money into a single trade.

Technical errors can also occur, such as trading with a faulty exchange or using faulty codes or software. If any of these errors occur, traders can incur large losses.

Crypto trading is complex and requires a high level of care and attention. As such, many investors recommend only trading with reliable and stable platforms. This can help to mitigate the risks of trading errors and limit any losses incurred due to a crash.

A Guide to Understanding Common Crypto Crash Situations

Overall, understanding crypto crash situations is essential for informed investing. It is crucial to remember that market fluctuations occur both within and across markets and that these changes can result in drastic drops in value.

Investors should use the tips outlined in this guide as helpful reminders to always remain vigilant about their investments and to not take on more risk than they can afford.

Did you find this article helpful? Check out the rest of our blogs!