Even if they haven’t put their toes in the investment waters, most people have probably heard of cryptocurrencies in the recent years. Is it time to invest now that the value of Bitcoin, Ethereum, and other cryptocurrencies is falling? Will bitcoin recover from the crash and become stronger?
What Causes Cryptocurrency to Fall?
The crypto crash is being caused by a combination of factors including record-high inflation, panic, rising interest rates, and a decline in confidence in crypto assets. The majority of the variables, according to analysts, are “macro,” which means they have more to do with the overall economy than with specific crypto market issues.
However, according to experts, some characteristics are unique to cryptocurrency investing. The cryptocurrency lending marketplace Celsius Networks LLC abruptly stopped all transfers, swaps, and withdrawals “due to extraordinary market conditions.” This increased investor anxiety specifically related to cryptocurrency.
According to a recent article in The New York Times, deliveryman and investor Jacob Willette, 40, invested his whole life’s money in a Celsius account. According to the Times, when the platform froze more than $8 billion in assets, Willette was not given any assurance that his money was secure.
Q1 2022 had a loss for Coinbase
Coinbase, a well-known trading and tracking platform, suffered a $430 million loss in the first quarter of 2022, and its shares fell by 81 percent. According to CBSNews.com, the corporation announced plans to let go of one-fifth of its workforce. The fact that Coinbase has endured previous crypto winters, though, has many analysts apprehensive about its future. According to John Todaro, a researcher with Needham & Co. who specializes in digital assets, “the winter would have to get increasingly worse for Coinbase to be in any genuine risk.”
The crypto meltdown affects more than just cryptocurrencies. Midway through June 2022, the Dow Jones Industrial Average, a significant stock index, began a bear market. The S&P 500 officially entered a bear market in the first week of July. Beyond the losses suffered by investors, the sector as a whole is feeling the effects of the cryptocurrency meltdown.
Is the Cryptomarket About to Crash?
Here’s more information regarding what triggered the most recent crash and how awful it is before looking at the future of cryptocurrency investing.
Early in July 2022, according to data from Coinbase.com, Bitcoin was trading at a price that was 68.33 percent less than its all-time high of $68,789.63. A bear market is when investment prices consistently fall by 20% from their peak. Therefore, there is no doubt that the price of Bitcoin is falling. Since Ethereum and other cryptocurrencies, such as alt-coins like Bitcoin, tend to follow Bitcoin’s lead, we can use Bitcoin as a market barometer.
In the first week of July 2022, Bitcoin increased by more than 15%, and bulls in the cryptocurrency market aren’t backing down. According to CoinTelegraph.com, experts predict that prices will likely stay steady around the $20,000 level for at least six months.
According to them, Bitcoin might trade between $14,000 and $16,000 during another bearish run.
Similarly, Ethereum increased by over 5% between July 6 and 7, but it has not recovered from its year-long losses and is still well below its all-time high of $4,800 in late 2019.
Can Cryptocurrency Survive a Crash?
According to the Library of Congress, stock exchanges first emerged in the United States in the late 1790s. In contrast, the cryptocurrency market lacks this long history of ups and downs. Investors should rest easy knowing that the stock market has gone through numerous bear and bull markets throughout history.
It’s encouraging to know, though, that cryptocurrency has endured numerous crashes in its brief lifetime. Since 2011, when Bitcoin lost 99 percent of its value, GOBankingRates.com has recorded at least seven big falls — and recoveries — in the price of the digital currency. These crashes are what gave rise to the term “crypto winter.”
Winter precedes spring, as TheGuardian.com notes, so investors may have to “wait for the market to thaw,” so to speak, and sit this one out. However, given the most recent crisis and the approaching recession, many investors could be reluctant to engage in cryptocurrencies.
A number of Wall Street investors are shorting in the meanwhile.
However, it might be worthwhile to continue. “In history, 100% of the people who have bought and waited 4 years or more have seen their investment grow,” Beincrypto.com stated.
Final Take
Cryptocurrency is still very speculative as an investment. It can be worthwhile to diversify your portfolio with some cryptocurrency right now if you have a high risk tolerance. However, you should first consider your overall spending plan, your emergency fund, and any high-interest credit card debt you may have.
Paying off debt and putting money aside for emergencies, which could include losing your job, should be your top priorities in light of the recession and rising interest rates.
You can buy Bitcoin or the alt-coin of your choosing on any of the big cryptocurrency exchanges, like Coinbase, Kraken, or Gemini, if you feel secure and have additional cash to invest.
