Table of Contents
The largest cryptocurrency, Bitcoin, seems to be crashing.
In mid-June 2022, the Bitcoin price dropped to $18,000.This should be the lowest since December of 2020. It continues to float below $20,000 at the beginning of July 2022.
To give you background about how drastic the fall is, in November 2021, Bitcoin (BTC) traded for as much as $69,000. With its value today, it dropped more than 60%. However, the highest losses would still be in 2018 wherein 80% of its value was lost.
Why is Bitcoin Crashing?
Why is this happening again now? Why is Bitcoin, the largest cryptocurrency, crashing?
Experts believe that this is due to the much wider global economic climate. Several factors like high inflation, ongoing war, and downturn affect almost everything.
Oleg Gibertstein, the co-founder of Coinrule, an automated crypto trading platform thinks that the stress the cryptocurrencies are experiencing right now is the same stress that other parts of the economy are experiencing. This leads to the prices falling.
He also said that it is not just crypto that is down but everything is down. He thinks that for the next few months the economic outlook will be bad. And Central banks will be in a hard situation with the economic growth going slow and high inflation.
Now, another reason that triggers the crashing of Bitcoin is the collapse of two lower-profile coins: Luna and the so-called “Stablecoin”.
Last April 2022, TerraLuna lost 99% of its value and rocked the cryptocurrency world. From its $118 it dropped to $0.09. It was worsened by the fall of its sister company TerraUSD which was normally stable.
This news has trended on social media with the caption “crypto crash”. This created panic among everyone involved in cryptocurrency. As a result of this panic, the number of people selling up increased.
The more people selling Bitcoin, the more the worth gets low; that’s how it works. The value is based on how much it is desired. And because people see that the value is going down, more people are deciding to sell up. And the cycle continues from there.
The panic heightened when Binance, the largest global cryptocurrency exchange, paused the withdrawal of Bitcoins for a few hours, saying that they had encountered “stuck transactions”. The same with Celcius, but they said that this is due to “extreme market conditions’. Moreover, Coinbase on the other hand has laid off 18% of its employees because of “crypto winter”.
Is There a Way to Turn This Around?
In essence, people who still have Bitcoins must hold on to them and others would need to buy them to stabilize the situation. And for the record, this has happened before. The persuasion through the stories told by those people who claimed that they got rich real quick and the celebrities endorsing crypto encourages and attracts new money.
Just, for example, Elon Musk wrote on Twitter about how much he is fond of crypto and that his company, Tesla has invested $1.5 Billion in 2021. And when Matt Damon fronted crypto with a slogan “ Fortune Favors the Brave” in 2021 that was played in the Super Bowl and with 28 Million views on both Twitter and Youtube.
Should You Worry About the Bitcoin Crash?
Cryptocurrencies are unprotected and unregulated. And due to continued losses of Bitcoin and other cryptocurrencies, UK Financial Conduct Authority (FCA) has issued another warning to investors of crypto. It reminds people that they should be prepared for losses and probably lose everything they invest since there are no guarantees of returns.
With all the prices of cryptocurrencies going down, should you be worrying?
People who invest in buy-and-hold strategies must expect price swings. According to Humphrey, the financial expert behind the Humphrey Talks, big dips are nothing to worry about. He said when the market is unstable big dips; he avoids looking at his investments.
He shared that he went through the “crypto crash” that happened in 2017 when major cryptocurrencies including Bitcoin lost their major value.
For Bill Noble, a chief technical analyst from a cryptocurrency analytic platform, Token Metrics, keeping your portfolio at 5% is what he recommends. Things will be unstable and will keep happening and this is the only way for you to not be stressed out so much with these swings.
Investing in crypto is a great risk. You might lose everything you have invested or you might get rich. What’s important is that you have to make sure that you are not riding too much on your crypto investment. You should be investing what you are “ok” to lose. Yang recommends that you use the same strategy for long-term investment. And that is, set it then forget it.
These extreme drops will probably bother you, but do not act rashly or aggressively towards them.
You might sell it at the wrong time which will cause you more losses. Instead, try to rethink your future steps like diversifying your investment with crypto-related stocks or even blockchains funds.