Crypto-Crash: Is it as Bad as Social Media Makes it?
Byline: Hannah Parker
Recent headlines surrounding the crypto-crash have taken the cryptocurrency community by storm. Many are becoming skeptical and losing trust in decentralized finance (DeFi). November 2021 was significant for the cryptocurrency market as Bitcoin (BTC) reached an all-time high of over $68,000. Less than a year later, it is hovering around $20,000, which is a significant dip, to say the least. The overall market is experiencing significant volatility, with many cryptocurrencies plunging 70% from their all-time highs. Some are beginning to state that this crash is the death of cryptocurrency, but is it?
What is the Crypto-Crash?
A crypto-crash can be defined as a collapse in the market leading to layoffs and an ongoing liquidity crisis in the cryptocurrency industry. This occurs due to cryptocurrency being affected by interest rates, inflation, and other macroeconomic factors; these all impact how confident people are to invest their money in risky digital assets.
This is not the first crypto-crash that the market has seen. There have been around six periods of drastic decline in Bitcoin (including other altcoins) since 2009. To put into perspective, the volatility of Bitcoin, the most recent crashes are as follows:
- 17 December 2017: Bitcoin was $19,783.06 (an all-time high)
- 22 December 2017: Bitcoin fell below $11,000 (-45%)
- 12 January 2018: Bitcoin depreciated by 12%
- 26 January 2018: Coincheck, Japan’s most significant cryptocurrency OTC market, was hacked, and $530 million was stolen. Coincheck indefinitely suspended trading.
- 15 November 2018: Bitcoins market capitalization fell below $100 billion for the first time since October 2017, and the price of Bitcoin depreciated to $5,500.
It’s imperative to remember that cryptocurrency remains a relatively new technology, and the full effects on the global economy are not yet apparent. The prices will remain volatile, and any unanticipated events can cause a price decline.
Greg King, the founder, and CEO of Osprey Funds, an investment firm specializing in digital assets, said that as Bitcoin gains adoption, “the up and down moves can be breathtaking. Taking the long-term view puts these moves in perspective,”
Will Cryptocurrencies Recover From the Crypto-Crash?
Presently, there is a bear market, which indicates cryptocurrency’s recovery on the horizon. A recovery that might be faster than what people would believe. Many economies are moving towards stimulating economic growth, a macroeconomic factor that will lead to the recovery of cryptocurrency. So, cryptocurrency is, in fact, in the early stages of recovery.
The Guardian mentioned that “when inflation rises, Bitcoin tumbles, and as growth prospects diminish, so too does the opportunity for a digital revolution.”
In addition, many fundamental changes are coming to the blockchain space, including the Ethereum Merge, which will significantly contribute to progress in the DeFi space.
Author of Cryptocurrency Investing for Dummies, Kiana Danial, said that “Any asset has ups and downs — cryptocurrency has more ups and downs because of the amount of hype and FOMO involved,”
So, what can you do now? The founders of Bitcoin Method Official suggest that you should witness the dip in Bitcoin as an opportunity to purchase because, as the past has shown, Bitcoin will only shoot upward again.
Cryptocurrency has proven over the past decade that it will always bounce back. If we look at the history of the stock market, it shows that it is likely to rebound again. If anything, Bitcoin, the crypto leader, has a history of weathering the storm.
All assets are accompanied by risk, so before you invest anything, you have to question whether you can afford a loss. Experienced investors know that markets follow a rollercoaster, so as much as they go down, they will come up again. Be sure to diversify the cryptocurrency you invest in. Don’t only hold cryptocurrency as the only asset you invest in – that is too much risk. The technologies used by cryptocurrency allow a path to be paved for long-run success, so why not invest now?
This article has been published in accordance with Socialnomics’ disclosure policy.