The digital asset sphere saw a retreat as the flagship cryptocurrencies bore the brunt of a downward trend. Bitcoin, the foremost digital currency, recoiled to a valuation of roughly $65,000, indicating a cooling off from previous highs. Ethereum, the second most popular coin by market capitalization, also echoed a similar pullback, casting a shadow on its recent performance.

The alternative coins, commonly referred to as altcoins, did not escape the ripple effects of their larger counterparts. Market participants observed a contraction in the values of various notable tokens, including Solana and meme-favored assets such as Dogecoin and Shiba Inu, which experienced a fall ranging between 9% to 13%. Contrarily, XRP emerged as the outlier, registering a positive uptick amid the prevailing downtrend across the crypto market.

A bird's eye view of the entire cryptocurrency market revealed a notable contraction of 3.14%, bringing the cumulative valuation to approximately $2.35 trillion. This setback occurred even as market transactions surged, doubling from the previous day to an impressive $94.07 billion, a scenario drawing a stark contrast with the outgoing capital witnessed in the sector.

These market activities came against the backdrop of the U.S. Federal Reserve's recent policy decisions, which seem to have instilled an air of caution among digital asset investors. Bitcoin’s dominance index marginally increased, indicating its slightly stronger resilience in comparison to other cryptocurrencies amidst the turbulent conditions. The market developments paint a picture of a sector wrestling with external economic pressures and investor sentiment.

Facts Not Mentioned:

1. Historical Context: Bear markets in cryptocurrencies have occurred in the past, notably after the end of the 2017 bull run when Bitcoin retreated from around $20,000 to lows below $3,500 the following year.

2. Institutional Involvement: Institutional investors and big corporations have entered the crypto space in recent years, impacting market dynamics.

3. Regulation: Regulatory developments around the world can significantly impact crypto markets. For example, in 2021, the Chinese government banned all crypto-related activities, which led to a market crash.

4. Market Recovery: The crypto market has shown resilience in the past, recovering from deep losses to reach new highs, although such recoveries can take varying lengths of time.

Important Questions and Answers:

- What causes bear markets in cryptocurrencies?Bear markets in cryptocurrencies can be triggered by various factors such as regulatory crackdowns, market speculation, technological flaws, security breaches, and changes in investor sentiment.

- How does the Federal Reserve’s policy affect the crypto market?The Federal Reserve's monetary policy, specifically around interest rates and quantitative easing, can influence investor appetite for risk. Tightening policies can lead to a reduction in investments in riskier assets like cryptocurrencies.

Key Challenges or Controversies:

- Regulatory Uncertainty: There is ongoing debate over how to regulate cryptocurrencies in a way that protects investors without stifling innovation.

- Security and Fraud: The crypto space is rife with security challenges and fraud, including hacks, scams, and Ponzi schemes, which can undermine market confidence.

- Environmental Impact: The energy consumption of Proof of Work cryptocurrencies like Bitcoin has led to environmental concerns.

Advantages:

- Democratization of Finance: Cryptocurrencies offer financial services to the unbanked and underbanked populations.

- Innovation: Blockchain, the underlying technology of cryptocurrencies, has potential in various industries beyond finance, such as supply chain management, healthcare, and more.

- Portfolio Diversification: Cryptocurrencies offer a new asset class for diversifying investment portfolios.

Disadvantages:

- Volatility: Cryptocurrencies are highly volatile, which can lead to significant losses.

- Scalability: Many cryptocurrencies struggle to scale while maintaining security and decentralize, leading to network congestion and high transaction fees during peak times.

- Lack of understanding: Many investors do not fully understand the technology or the risk associated with crypto investments.

For exploring the dynamic nature of cryptocurrency markets, you can visit the following legitimate information sources:

- CoinDesk- Cointelegraph- Bloomberg

Remember to always exercise caution and perform due diligence when navigating through crypto-related information.