Why Is Crypto Down?

The crash of crypto exchanges FTX and FTX.US is the driving force behind crypto's most recent drop.
Kurt Woock
By Kurt Woock 
Edited by Andy Rosen

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.


The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.

MORE LIKE THISCryptocurrency

Crypto is down because of investors selling off their assets following the crash of crypto exchanges FTX and FTX.US. Because FTX had invested in so many crypto-related companies and cryptocurrencies, its collapse has far-reaching impacts in the sector.

On Nov. 11, 2022, FTX and FTX.US filed for Chapter 11 bankruptcy. Before that, the value of its native token, FTT, crashed from over $25 to under $2. The prices of Bitcoin and Ethereum sank to two-year lows.

The effects of this meltdown are not over. Crypto exchange BlockFi, which had received a line of credit from FTX.US and was set to be acquired by it, froze withdrawals and filed for Chapter 11 bankruptcy on Nov. 28.

🤓Nerdy Tip

If you're worried about keeping your crypto with an exchange, consider moving your digital assets to a separate crypto wallet. Most exchanges allow you to transfer assets to these wallets, which can be online (on a separate platform) or offline (on a thumb drive with added security features).

» Will FTX's fall affect your crypto? Learn what steps you can take today

In general, what causes crypto downturns?

Here are some of the general reasons behind big drops in prices:

  • Low liquidity. If a cryptocurrency is trading at lower-than-usual volumes, weird things can happen, like a single large trade throwing off the market by swinging prices closer to the value of that transaction. Following an event like FTX's crash, for example, big investors or entities dumping large amounts of crypto could cause prices to drop quickly.

  • Speculative trading dries up. High-risk trading with hopes of quick returns can end badly when momentum wanes.

  • Loss of trust. Trust in a product is a price driver. If it evaporates, prices can, too. In addition, because crypto is a novel asset class based on relatively new technology, signs of trouble such as cyberattacks or product failures can adversely affect the broader sector. As FTX's bankruptcy shakes investors' trust in the crypto industry and exchanges, many might be less willing to put money in crypto.

Advertisement
NerdWallet rating 

4.2

/5
NerdWallet rating 

3.6

/5
NerdWallet rating 

3.9

/5

Fees 

0.5% - 3.49%

depending on payment method and platform

Fees 

$0

per trade

Fees 

$0

per trade

Account minimum 

$0

Account minimum 

$0

Account minimum 

$0

Promotion 

$20 of BTC

for new users after trading $100 or more within 30 days

Promotion 

None

no promotion available at this time

Promotion 

Get $5 in Crypto

after opening a Webull account, activating crypto trading, and completing one [1] crypto trade before 2/28/2023.

Get more smart money moves – straight to your inbox
Sign up and we’ll send you Nerdy articles about the money topics that matter most to you along with other ways to help you get more from your money.