It is worth noting that Bitcoin’s situation is extremely curious right now. For example, the volume of BTC deposits to cryptocurrency exchanges (in green) continues to decline, which is broadly in line with what is happening in the market during the collapse phase in 2019. However, the amount is less than the number of bitcoin withdrawals from exchanges (in red), indicating an exodus of coins from trading platforms. And this has never happened before.

A new trend emerged in the fall of 2022 – during the collapse of the cryptocurrency exchange FTX. With that in mind, we can assume that many digital asset owners then realised the risks of linking to centralised blockchain companies and have since sought to withdraw coins to non-custodial wallets.

Reasons for Bitcoin’s fall

The value of BTC is hovering just below $22,000 this morning.

That said, the Bitcoin collapse itself was quite steep. A 15-minute chart of the first cryptocurrency’s value allows us to draw a corresponding conclusion. It looks like this.

On a 24-hour scale, most of the major altcoins also reacted with a drop in Bitcoin’s price. Here is the current value of popular digital assets.

The first reason for this notable collapse was US Federal Reserve Chairman Jerome Powell’s speech to Congress. He was giving a speech on the current state of the US economy and the prospects for further increases in the base lending rate. Here is one of his quotes.

The latest economic data were stronger than expected. The final level of the benchmark lending rate is likely to be higher than previously thought. If the aggregate data points to the need for a more rapid tightening, we will be prepared to increase the pace of rate hikes.


What we are talking about here is the key lending rate, which determines the cost of credit for commercial banks from the central bank, i.e. essentially the cost of money. The more expensive it is, the more the economic activity of the subjects decreases. It becomes less profitable to borrow, so businesses are more reticent. This leads to layoffs, wage cuts, a corresponding decrease in revenues for other businesses, and so on in a circle.

Also, an increase in the key rate leads to a decrease in investor appetite. As the link with fiat money, represented by the dollar, becomes more expensive, they prefer to wait out such phases precisely in the dollar. Well, risky assets like cryptocurrencies find themselves out of sight of capital owners, which ends in a collapse.


Following the statement, the DOW and S&P 500 stock indices fell 1.18 per cent and 1.08 per cent respectively and Bitcoin’s price hit $21,927. The expected reaction to Powell’s inflation report is an interest rate hike on 22 March, which will be higher than expected.

The bottom line is that the Fed will raise its key rate higher and longer because of the challenging situation. Naturally, this is negative news for the markets because it means less investor activity in the economy as a whole.

According to Cointelegraph’s sources, before Powell’s speech the consensus of investors was the next interest rate hike of 0.25 percent, i.e. to a target range of 4.75 to 5 percent. However, this could change in the next two weeks, especially if Powell continues to mention the prospect of a tougher US Federal Reserve strategy.

Indeed: Shortly after Powell’s speech, analysts began forecasting a rate hike of 0.5 percent, or 50 basis points. This was reported by Reuters.

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The second fundamental reason for Bitcoin’s collapse is the significant reduction in liquidity in crypto, caused by recent actions by the US Securities and Exchange Commission (SEC). Earlier, the regulator banned staking on the Kraken exchange for US customers and also stopped Paxos from issuing BUSD Stablecoin.

Analysts speculate that such actions were responsible for the loss of the bullish momentum seen in crypto since the beginning of this year. In addition, the constant negative comments of the Commission’s head Gary Gensler, who regularly hints at the possibility of recognizing all altcoins as securities, played their part. In such a case, coin trading and the cryptostartups themselves would have to be significantly restricted, which would definitely lead to a slowdown in the adoption of digital assets, according to CryptoPotato.

Concerns about Silvergate’s solvency are also affecting cryptocurrency prices. Silvergate has been one of the main gateways of entry and exit for capital into the digital asset market, well its potential closure could complicate liquidity across the industry. Simply put, it will make it harder for investors to inject additional money into the cryptocurrency industry. Over time, though, we believe popular exchanges will be able to get out of this situation and find other providers of the right banking services.

Finally, the third reason for the collapse lies in a trivial correction. Bitcoin and the crypto market in general got off to a strong start from the beginning of 2023, when 64 per cent of investors went into the black and Bitcoin’s price set a local high of $25,300 on February 21. In such an environment, a correction is inevitable and comes from the understandable desire of some traders to lock in profits by selling the asset.


We believe that the cryptocurrency niche is now essentially assessing future prospects for the economy and markets as a whole, i.e. coin rates are starting to match the current situation. Which means that if the key rate increases by 50 basis points on March 22, it will not come as a surprise to investors. However, analysts now expect such an increase, but the previously forecast increase of 25 basis points will probably come later.