As low as prices go, the crypto market crash is not over. Bitcoin hovers around $30,000, Ethereum is flirting at the $2,000 mark and smaller altcoins remain in free fall or have been wiped out entirely. What does this all mean for crypto’s future? While the current state of crypto seems to be a disaster for many investors, long-term holders seem content to just wait. All financial institutions are also struggling. There are not many signs that a complete reversal is possible. Even Bitcoin’s value dropped more than half from its peak in November 2021.
There are positive lessons to be learned from the crypto market crash. It’s good to know that Bitcoin’s performance has shown us more stability than ever. Although it has fallen from its peak, Bitcoin’s current price per currency still stands out in comparison to past crashes. Historical prices don’t predict future returns.
One positive thing about crypto is that it is not going down by itself. The ongoing inflation is also causing stock markets to fall. This suggests that crypto’s behavior is more in line with the economic environment than being volatile as was the case in the past. Although the Terra/Luna crash may have contributed to the current downturn in the economy, it also shows that the market can eliminate poor design. Bad investments can be made in any market. The longer-term health and viability of crypto’s ecosystem will be affected by the disappearance of projects that are not suitable for long-term use.
Gary Gensler, Regulations Chair at the SEC, has suggested a better future in which crypto-assets are covered by investor protection laws. This regulation could be positive, as it could legitimize crypto and attract more investors. Investors in Terra/Luna could have up to $250,000 of their expenses reimbursed by such regulations. The SEC, however, has faced credibility problems in executing the rules it exists to uphold.
While cryptos experienced unprecedented growth in the last year, they were also subject to speculative madness. Inflation can have its highs. It can affect people’s finances as well as their ability to invest. Inflation increases the likelihood that people will withdraw their investments to pay for living expenses. Many markets have seen unsustainable growth due to an influx in new investors and traders. They are currently at or near their lowest value. Although it might seem like crypto is in decline, many altcoins are still likely to grow in value, even if their prices drop. Investors who are savvy should consider both sides of any trade.
Cryptocurrency will likely be restricted by the US Government as a result of its investigation into crypto. Current financial institutions are threatened by the idea of a decentralized system. The RTGS infrastructure is one example. In banks all over the US, Real-Time Gross Settlement Systems are being implemented. They are designed to replace the current system that nets debits at the end, so accounts can reflect their real balances in real time.
All US Banks should use RTGS by 2023. Blockchain consensus algorithms have enabled cryptocurrencies to reflect real-time balances. Innovation is valuable, but it’s difficult to see the government letting go the financial system it built over many decades. Particularly if the new system they create is less controlled and renders existing institutions and methods of operation obsolete.
What is the future of crypto?
The most important question in crypto is volatility. The year has been dominated by blockchain technology, bitcoin, and altcoins. While many believe we are in a bubble and others believe it is only beginning, some people think otherwise. The relative stability during the ongoing crypto market crash could mean that it’s still not over. Cryptocoin may have much more to go or be about to burst.
Uncertainty will continue to permeate the market, until we know what regulation the US Government will issue from its crypto investigation. The outcome will have an impact on crypto, whether it is regulation, new taxes, or a shift towards a digital currency. After the research is complete and we know the outcome, we will have a better understanding of crypto’s position relative to other financial institutions.
Crypto isn’t over…until its over
Large-cap cryptocurrency giants like Bitcoin and Ethereum have fallen 50% from their highs last year. But cryptocurrencies have experienced many sharp pullbacks in the past. Prices fell by 80% in early 2014 from November 2013, when they were at their highest. However, prices rose to new heights in September 2014, nine months later. We can’t assume that today’s crypto prices are comparable to those of the past because they were lower.
Investing in crypto is a long-term investment. The meme coin craze of last year saw many people flock to cryptocurrency hoping to make overnight billionaires. But that’s not how it works. You should consider price stability if you intend to keep your coins for longer than six months.
The crypto markets are being tethered together by financial institutions that continue to invest in crypto. JP Morgan invested in the crypto market this week and predicted a rise. Blockchain technology, which forms the basis of cryptocurrency, is expected to be around for the long-term. Crypto’s promise of being a currency is that it can be used worldwide and not restricted to any one country. It is important to remember that price swings can only be made after selling. or following a total market crash.