The price ofBitcoin fell below $20,000 for the first time since November 2020 on Saturday due to a broader market meltdown caused by rising interest rates, inflation and economic uncertainty spurred by the war in Ukraine.

It took several months for the plunge to take place. Its fall was accelerated in recent weeks by the collapse of two major cryptocurrencies, Terra- Luna and Celsius.

R.A. Farrokhnia is a professor of financial technology at Columbia Business School. The cascade effect is created when investors flee riskier assets.

Digital art and media known as NFTs, collectibles, sneakers and trading cards, and other risky assets have all increased in popularity as a result of investing in Cryptocurrencies. Free-flowing checks, low interest rates on other investments, a social media frenzy, and a fear of missing out on the next big thing were some of the factors that drove the speculation.

It was designed to make transactions simpler. The digital currency uses a network of computers that record transactions on a permanent record. Government can't change or control the record.

The price of a single Bitcoins increased from March 2020 to November 2021. In November 2020, it passed $20,000, which was a new record.

The rise of cryptocurrencies attracted new people to learn about and invest in them. After central banks created fears of inflation by flooding the economy with money, some investors decided to park their cash in the virtual currency. There will only be 21 million of the token in the future. Almost 20 million have been electronically mined.

The run-up made Wall Street and Fortune 500 companies more open to new ideas. Goldman and Morgan Stanley are going to give wealthy customers access to funds. There are options for trading and shopping with virtual currency.

Square bought $50 million of Bitcoins and changed its name to Block in order to show its support for the technology. The company bought more than a billion dollars of it. The investment firm raised more money for a fourth fund focused on cryptocurrencies.

Excitement peaked in April last year when Coinbase went public at an $85 billion valuation, making it the most valuable exchange in the world. It was the first time that the digital currency topped $60K.

In the summer of last year, El Salvador became the first country in the world to classify digital currency as legal tender. The president of the country added laser eyes to his profile picture on the social networking site. As the price of the digital currency has fallen, the value of the investment has been halved.

The industry spent a lot of money on lobbying as senators and mayors began to promote. The new mayor of New York said he would take his first three paychecks in digital currency. The proposed legislation would give more authority to the Commodity Futures Trading Commission, an agency that has been courted by the industry.

The celebrities were afraid of missing out and flogged their NFTs on talk shows. In this year's Super Bowl, there were four ads for companies in the space.

The stock market plummeted and the tech sector was hit by layoffs. Money was moved to less risky assets by investors who lost confidence in their investments in cryptocurrencies. Projects crashed as a result of withdrawals. The collapse of TerraForm Labs, which created TerraUSD and Celsius, sent the broader market into a tailspin.

The question of whether outsiders always need to come in and sustain it is brought about by the circular flow of money.

As investment in cryptocurrencies became more mainstream, it did not find much success as a means of everyday transactions. It's upward trajectory has made it more valuable to hold. Companies created elaborate ways to make loans or allow people to use their Bitcoins as security in a sector that is called Defi.

According to an analysis by the Columbia Business School, around half of all Bitcoins were still making money. Sixty-one percent of the addresses did not sell in the last year, which shows that many people bought into it to hold it.

Tax evasion, risky behavior and fraud can be enabled by Cryptocurrencies. Regulators in Hong Kong, Canada and the United States have warned of regulatory actions after China cracked down on cryptocurrencies. Britain has banned one of the world's largest coin exchanges.

The use of the virtual currency by criminals, including the ones who attacked theColonialPipeline last year, has caused further scrutiny. Even though the ledger is public for anyone to see, it has helped prosecutors track down some criminals.

The recent sell-off has led to cuts at companies that were in high growth. The company laid off 18 percent of its employees. There have been job cuts at other companies.

In previous downturns, supporters encouraged their peers to invest more while prices were low. The message is not landing according to analysts.

The analyst at OANDA said that there was a lot of pessimism in the space. There is no confidence in buying the dip.